Although many people know that it is possible to make money from cryptocurrencies by waiting for their prices to rise and then selling them at a profit, there are indeed other ways you can earn from your digital coins investment. One of the ways is to earn interest on crypto, and this is a good option if you have coins you are willing to hold for some time.
If you have some idle bitcoins, it could be an option to learn how to earn interest on Bitcoin so you can make some passive income instead of simply HODLing your coins and without them making any money for you. However, the question that may be on your mind after we have mentioned earning interest on BTC is, “What is Bitcoin interest, and how does one earn it?” This article looks at some crucial things you need to know about how to earn interest in crypto, so you are in the right place.
Understanding a cryptocurrency interest-earning account
To earn interest on your crypto, you will need to open a crypto savings account. Although you may assume this account is like an ordinary savings account, it is not. It has some risks that conventional fiat savings accounts don’t have. Therefore, even as you deposit your digital coins and look forward to taking advantage of the growing interest in crypto, keep in mind that this is different from saving your cash in a bank account. You must be aware that crypto savings accounts have risks.
The steps to follow to earn interest in crypto
Several crypto exchanges offer interest-earning accounts that pay interest in the currency that you used to fund your account. For example, if you funded the savings account in Bitcoin, you receive interest in Bitcoin; thus you earn interest in crypto because of having a Bitcoin interest account. The interest rates the platforms pay you to vary according to the type of cryptocurrency you select.
Here are the steps that you need to follow to get crypto interest on your deposits:
- Open a cryptocurrency account
First and foremost, you need to choose a platform that allows you to earn interest in crypto and open an account with them. Some of the best platforms that offer impressive annual percentage rates (APR) on various coins include YouHodler, Gemini, BlockFi, Celsius Network, and Coinbase.
- Check the interest rates
You can check the interest rate that each of the digital currencies will earn you on the account providers’ websites. Also, the interest you earn varies from one platform to another, even for the same cryptocurrency, and this depends on if the platform retains a part of the interest.
The interest rates paid on the crypto savings accounts are referred to as floating interest rates which implies that they change constantly following the demand for crypto loans. Digital currency loans are usually demanded by exchanges that provide leverage and leveraged investors.
The crypto lending platforms that operate savings accounts that allow investors to make interest on crypto advertise their annual percentage yields, which is the amount you will earn in a year if you invest in the interest-earning accounts. The crypto interest payouts far surpass the amount you would get on a conventional savings account.
- Add cryptos to your account
Most of the platforms that let investors earn interest in crypto make it pretty easy to fund their accounts. Some even allow investors to buy crypto directly with their bank accounts, making it easy to earn interest on the digital coins even if one doesn’t own the qualifying coins. Some platforms like YouHodler even allow you to convert fiat currency or cryptocurrencies to the qualifying digital currency on which you want to earn interest.
- Get interest on your crypto
After adding funds to your interest-earning savings account, you will be eligible for interest. You can sit and watch as your crypto holding gets bigger. The idea of earning interest in crypto is attractive to investors who have a great conviction or believe the price of BTC and other digital coins will rise in the long run. The reason for this is the exponential potential for growth on a cryptocurrency interest account. Common cryptos investors can earn interest on are Bitcoin, Litecoin, Ethereum, and Uniswap. Because the investors earn interest in the currency in their interest-bearing account, they maintain their exposure to the market in the cryptocurrency they invested in.
Using Stable coins to earn interest on crypto
The platforms with interest-earning crypto accounts offer higher interest rates for the cryptos known as stablecoins. Stablecoins are a class of cryptocurrencies that, theoretically, avoid the risks of the erratic price changes typical of cryptocurrencies. The special cryptos minimize volatility by being tied to stable external assets, such as the US dollar or gold, and use blockchain technology for transactions. An example of a stablecoin is USDC which is backed by and convertible to USD at a ratio of 1:1. Stablecoins are intended to offer a calmer investing experience, but their stability is still dependent on the coin-issuer. Therefore, they are only as stable in value as the company backing them.
Earning interest on digital coins on YouHodler
When considering the platform you will choose to earn your interest in crypto, you should consider YouHodler because it is one of the best. Here are some things that make this platform a better choice:
Ø The platform pays interest payouts weekly in cryptos and stablecoins
Ø It offers an impressive APR on stable coins than the other exchanges.
Ø It allows investors without cryptos that qualify for interest to convert their fiats and other cryptos on the platform
Advantages of earning interest on cryptocurrencies
Ø The savings accounts have low or no minimum durations for locking up cryptos
Ø Interest increases with the appreciation of digital assets.
Ø Some platforms have no minimum amount to open an interest-earning account
Disadvantages of operating crypto interest-bearing accounts
Ø The interest rates are floating, so there is no guarantee that they will remain high in the long run, which may affect the payout if they fall.
Ø The industry has low regularly oversight paving the way for scams
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Conclusion
Now you know how to earn interest on crypto, you can grow your investment quickly instead of holding it and waiting for a rise in prices. In addition, most platforms allow the investor to withdraw their crypto holdings any time they need them, thus no inconvenience.
However, some platforms have a minimum duration to deposit your coins in your savings account. Unfortunately, the requirement exposes investors to price volatility in the cryptocurrency market. You should also be cautious as you choose the platform to earn interest to avoid possible losses through fraud or the exchange collapsing.
