How to Earn Interest on Your Crypto

Rather than HODLing your coins and gaining nothing from doing so, it is a smarter investment strategy to earn interest on your crypto investment. Several online platforms have created options for crypto holders to increase the size of their portfolios by opening crypto-based interest accounts. The good news is that it is quite simple to earn free crypto from these investment schemes.

Some companies require a minimum investment amount for investors to deposit crypto such as BTC into a savings account with them. You could earn a good amount of interest from your investment if you open a crypto interest account on a platform such as YouHodler, Coinbase, or eToro.

Long-term investors should consider gaining interest on stablecoins and regular cryptos. Earning interest on your crypto could allow you to make a passive income and boost your financial position amid the Covid pandemic. You can further compound your profits if the market rises.

While a number of crypto sites offer interest generating accounts for you to earn interest on, it takes some effort to find those with the best interest rates. Centralized applications based on the Ethereum network could also allow you to earn interest on your crypto without breaking a sweat.

Centralized vs. Decentralized Cryptocurrency Interest Options

Basically, there are two main ways to earn interest on crypto: decentralized (DeFi) and centralized platforms. With centralized platforms, users earn interest via their crypto bearing accounts. These are the easiest ways for beginners to start their journey to earning a passive crypto income.

You may be able to earn interest at a rate between 4% and 12.5% based on the particular currency you choose. BlockFi, Celsius, and Crypto.com represent a few centralized places to earn interest on your crypto assets.

Decentralized apps on the Ethereum network allow you to earn interest on your cryptocurrency holdings without the need for a custodial wallet. The Ethereum network may require several steps to get started, but there are several benefits to gain from doing so. For instance, you can find better interest rates on DeFi programs such as Aave and Uniswap.

How do I earn interest on my crypto?

Virtually, every crypto investor understands that digital currencies are extremely volatile with Bitcoin being the best example.

In recent months, Bitcoin has seen an erratic growth pattern, peaking at a record $65k in April 2021 before falling drastically. It has recovered somewhat since. Experienced traders evaluate the uncertainties in the market before they play the game of Bitcoin. Many people have lost fortunes by panic-selling their assets after getting in the FOMO buzz. However, with that being said, buying and HODLing doesn’t guarantee you greater returns in the future either.

If you are a smart trader who wants to give yourself a head start, you will want to boost your earning potential through crypto interest accounts.

How does a Bitcoin wallet with an interest account work?

Theoretically, crypto Bitcoin interest accounts work in a way similar to traditional bank savings accounts, except that the asset invested crypto. Users deposit their crypto (such as BTC or altcoins) for a specified timeframe. Their assets then earn them compound interest with the returns paid out regularly. You can choose to withdraw your funds anytime, anywhere.

The rate of crypto interest varies depending on market trends and the profits are usually paid in the form of the currency deposited. Withdrawal fees may be applied and adjusted according to blockchain conditions. It is important to note that crypto interest rates are way better than regular market rates. To win big, you will need to find a balance between the risks and your rewards.

For national savings accounts, the typical annual percentage yield (APY) rate is about 0.70%. On the other hand, leading crypto interest platforms like YouHodler allows you to earn interest up to 12% APY on your crypto. All your deposits will start earning interest at the best rates on YouHodler and your rewards are paid out to you regularly, including on a weekly basis.

How to start earning interest on your crypto saving account

Many platforms ask users to go through the following registration processes

ID verification: depending on the platform you choose; you may be asked to provide proof of your identity. After using your email ID to sign up, you will need to upload government-issued ID documents and set up multiple-factor authentication.

Having verified your account, you will be approved to deposit your crypto and start earning interest.

Choose your crypto: cryptocurrency interest platforms offer several crypto options: select the crypto you would like to deposit.

Copy the crypto deposit address and initiate the transaction

Wait for the deposit to go through. With Bitcoin, deposits require blockchain confirmations before your account will be credited. Once the deposit is completed, your account will start accruing interest right away.

What are the benefits and disadvantages of earning interest on your cryptocurrencies?

One key advantage of opening a crypto interest account is that the rates are attractive. It’s not common to hear of a traditional bank savings account offering a whopping 7% interest. But with crypto, this is not beyond your reach. The blockchain fintech industry can offer higher interest rates.

Here are a few advantages and disadvantages of earning interest on your crypto

Pros

• There is little to no lock up time on crypto assets
• With a cryptocurrency savings account, your interest multiplies as your digital assets appreciate
• It’s relatively easy to create a crypto interest account
• Even with a small amount of capital, you can open an interest-paying account

Cons

• Cryptos are highly volatile, which means your earnings could depreciate if there is a market crash.
• Unreliable crypto platforms could expose you to scams if you are not careful
• There is no proper regulatory framework in the crypto industry, so it is easy to fall victim to fraudulent actors
• Floating interest rates are dynamic, so there is no guarantee you will enjoy high rates for the long term                                                               

Which is the best crypto savings account?

YouHodler, SoFi, and Gemini are among the best places to earn interest on your crypto. If you don’t plan to keep your crypto for the long term, you will want to choose a platform with zero minimum lock-up requirements on savings accounts.

Always make it a point to search for crypto wallets that pay interest and compare rates offered by different companies to find competitive rates.