The world of cryptocurrency is complex to understand and navigate, especially for rookies. One wrong move and you could end up losing a huge chunk of your money.
However, if you are a dedicated cryptocurrency investor who has been in the game for a while, you would surely be aware of all the right tips and tricks. So, why not use your skills to earn more interest?
You can easily have a passive income by earning interest on cryptocurrency and still compound your yields, provided the market is on your side.
The good news is there are plenty of ways to get started, as several platforms today give you the chance to register interest-bearing accounts.
But, how do you get started? Read through this article to learn more.
Cryptocurrency Interest Options: Centralized Platform vs. Decentralized Platform
Before you get started on earning interests, you need to have an idea of the two main ways you can do this.
The first method involves using a centralized platform. Through this method, you can earn interest via your own interest-bearing account. If you are a rookie, this would be the best way to get started.
On the other hand, we have decentralized applications that allow you to earn interest without having an account on a platform, such as Ethereum.
A 4-Step Guide on How to Start Earning Interest on Cryptocurrency
Step #1: Create an Account
The first step to start earning interest in crypto is to create your account on a platform that can help you earn interest.
If you are new to crypto, start by creating an account on a platform like BlockFi. Once your account is created, connect it with your current bank account. This way, you can easily use cash to buy crypto.
Currently, BlockFi has an annual interest rate of 8.6% per month. However, the type of cryptocurrency you use also plays an important role here.
Additionally, you can also try other great options like Celsius Network and Coinbase.
Step #2: Start Weighing Up the Interest Rates.
The next step is comparing the interest rates on your account.
Once you have successfully created your account, you will be able to get an idea of what interest rate you will be earning through different cryptocurrencies.
Keep in mind that this interest rate will differ from platform to platform. For instance, one platform might take a small percentage of the interest you earn. If this is the case, your interest rate might differ even if you have been investing with the same crypto.
In layman's terms, interest rates are basically just floating rates on your savings account. Therefore, your interest rate will continue to change depending on the need for crypto loans for the hour. Leverage crypto investors usually make such large supply and demand.
For example, Stablecoins usually offers an interest rate of 6% to 9%. However, certain interest rates are much higher than this, even over 100%!
This might sound great, but high-interest rates also show you high inflation rates. So if you are a rookie to the cryptocurrency market, it is best recommended to have an interest rate not lower than 25%.
Step #3: Add Your Cryptocurrency to Your Collections
As mentioned earlier, platforms like BlockFi, Celsius Network, and Coinbase make it easy for you to earn interest while also connecting it to your bank account.
In fact, these websites also allow you to purchase crypto from your bank account, making interest-earning an easy task.
The best choice for crypto exchange platforms are Gemini, Coinbase, and eToro. Once you have bought your cryptocurrency via one of these exchange platforms, you can start sending your funds directly to your virtual crypto wallet to earn interest.
Step #4: Start Earning Big Interests!
If you have followed these three steps down to the T, you can now start earning interest on cryptocurrency. So sit back, and watch how your holding starts to grow!
Expert crypto investors are particularly attracted to the offer of earning interests with cryptocurrency. This is because they believe in the cost of cryptocurrency down the road, thanks to the enormous potential for growth for the crypto interest account.
Let's say you are planning to invest in a Bitcoin with a valuation of $30,000 during the start of a year. With this investment, you can earn an interest that would be double the price of the actual Bitcoin.
In addition to this, you will also be earning double the amount of the 7% interest for your initial investment on the $60,000 Bitcoin!
As you can see, the sum of the interest value is pretty high, making interests an attractive deal for experienced crypto investors.
The most popular cryptocurrencies through which you can earn interest are:
The total interest you will pay while using these websites will be in the form of cryptocurrency and will be deposited into your interest-bearing account.
This way, you can maintain your visibility to whichever crypto market you are investing in.
On the other hand, some cautious investors find the matter of interest-bearing crypto investments to be a subject of skepticism.
This is why stablecoins are directly connected to another asset, which is usually the US currency.
The investors who use stablecoins to earn their interest mostly opt for DAI, USDC, or Tether. Based on the type of stablecoin you prefer, your rate of interest will also differ based on the current supply and demand.
Keep in mind that most interest you earn by using crypto is just a floating interest rate, which solely depends on the existing supply and demand for crypto. Therefore, the interest rates will continue to waver and fluctuate. However, most of the larger crypto coins come with a stable APR rate.
For instance, the range of the interest rate for those using Bitcoin is generally from 4% to 8%.
What is the Idea Behind Compound Interest?
The interest percentage of most crypto savings accounts starts to get accumulated every week (or sometimes even shorter). This makes it perfect for professional crypto investors as compound interest can help grow your savings account faster than using plain interest.
For instance, assume you have just invested $1000 on a product which gives you an interest of 10%. This value will get compounded every year for the next two years. During the second year, you will be earning interest on your prime deposit. However, you will also get the interest that has been accumulated over the last two years.
In simple words, compound interest works hand in hand with time. This means the longer your investments stay, the faster it starts to expand.
This is not the same as usual interest because you will not be earning any interest on previous interests.
Top Crypto Investment Platforms to Get Started
Whether you a professional investor or an amateur, if you are interested in earning interests in cryptocurrency, you can get started with the two best platforms of all time: BlockFi and Gemini.
Listed below is a quick comparison table between the two platforms to help you decide which is best for you.
BlockFi is best recommended for those who:
- Native crypto clients
- Curious crypto clients
- Fringe crypto clients
Gemini is best recommended for those who:
- Want a convenient mobile app
- Experienced crypto investors
- Investors who want to buy, sell and store their investments in one place
Pros of BlockFi
- No extra charge and fees
- It gives the best interest rates according to the current market
- You can earn, trade, and borrow from the same platform
Pros of Gemini
- Quick registration process
- Suitable for people of all skill levels
- It comes with virtual storage wallets to store investments
Cons Of BlockFi
- Beginners might find it difficult to use
- No investment advisor to help you navigate
Cons Of Gemini
- It comes with a commission fee and a convenience fee.
Earning Interest on Cryptocurrency: Pros and Cons
The biggest benefit of earning your interests via cryptocurrency is that you can easily beat their cutthroat interest rates.
In the conventional financing industry, a 7% interest rate in a savings account is something that is unheard of. However, when you eliminate the depreciated expenses that come with blockchain, you can easily get a greater interest rate.
Listed below are some of the pros and cons to earning interests via cryptocurrency:
If you are looking for a quick, easy way to grow your current investments, you might want to try earning interest in cryptocurrency. This might be difficult for beginner investors, but you can easily get started with your cryptocurrency holdings with the right platform!