Another benefit of earning interest on crypto is that it facilitates compound growth. To illustrate the benefits of earning interest on crypto, let’s look at an example. In this guide, we explore the different ways to earn interest on crypto and which platforms to consider for this purpose. Platforms that do not have robust infrastructure or security measures are at greater risk of being hacked. You need to choose a site that has high levels of security to minimize your chances of losing your assets.
With annualized interest rates of 3% for Bitcoin and 8% on stablecoins (such as USDC and USDT), your initial investment can increase substantially when compounded over a few years. Crypto interest accounts may seem attractive with their high interest rates, but they require a much higher risk tolerance than a traditional interest-bearing account with a bank. Before deciding whether to deposit your Bitcoin into a savings account, you should be aware of the following differences and dangers. Overall, CoinLoan is an easy-to-use crypto lending platform with loans as low as 4.95% APY and interest accounts for up to 12.3% which is competitive in the market.
If you continued to roll your profit back into the original $50,000 for an entire year, you would earn interest on crypto totaling $2,300. That’s a pretty good rate of return for just letting your Bitcoin or other altcoin sit in one place. Compound interest is the result of reinvesting interest rather than paying it out so that interest in the next period is calculated based on the principal sum plus any interest earned before that. If you choose to hodl, you simply let your crypto sit while waiting for the price to go up or down (depending on your financial goals).
You can read our detailed breakdown of Binance here, if you want more information about their full range of features. Crypto savings accounts work in a similar way to traditional savings accounts, but as they deal with crypto rather than fiat currency, they typically come with higher rewards and greater risk. It is often perceived as the equivalent of earning dividends on a stock to earn passive income whether the underlining asset appreciates in price or not. Hodlnaut has a token swapping service that allows investors to trade their digital assets for others within the platform. This means that users can take control of their cryptocurrency portfolio by managing asset balances without having to transfer coins out to another exchange. HedgewithCrypto has conducted an assessment of the top savings accounts to earn interest in this comparison table.
Finally, we come to the easiest option, which is a cryptocurrency savings account. A Crypto savings account is provided by centralized companies, which agree to pay users interest for holding their tokens on their platforms. The company can use the deposit in various ways, including lending it out to generate interest. When the tokens are locked in the blockchain, they help keep the network safe.
If you are interested in earning interest on crypto, but you haven’t bought any yet, you can find our recommendations on the top crypto exchanges to make an informed decision. If you have tokens that run on a blockchain such as Ethereum or BNB Chain, you can use them to provide liquidity on DeFi protocols and generate yield. We’ve already discussed this in the Wrapped Bitcoin section above, but the difference with other tokens is that you don’t need to wrap them first. Hodlnaut offers one of the highest interest rates for Bitcoin at 6.2% APY compared to 6% on Nexo. No fees are charged when making a deposit however a small fee applies for withdrawals.
For example, an interest account with USD can earn 12% APY when paid out in the platform’s native token. Binance is one of the best crypto trading exchanges in the world that offers something for both crypto-investors, HODL’ers and traders. New customers on the exchange can also get up to $100 for free when using a unique Binance referral code. While Compound has jumpstarted the crypto-lending trend and is growing in popularity, yield farming still requires expertise beyond the capability of an average investor.
We review five top-rated places, each offering a different way to earn interest on Bitcoin and other digital tokens. In terms of borrower defaults, this is based on who your platform lends to. If they are clear about their lending standards and have stringent requirements for their borrowers, the risk of default is lowered. Wrapped Bitcoin is an ERC-20 token, which means it runs on the Ethereum blockchain, while Bitcoin itself can only run on the Bitcoin blockchain. WBTC is pegged to BTC, meaning the two should always have the same value. You need to swap your BTC for WBTC if you want to be able to use it on Ethereum-based DeFi platforms.
Covo Finance is a decentralized finance platform that offers a spot and perpetual exchange for major cryptocurrencies such as Bitcoin, Ethereum, and Chainlink tokens. The pool consists of a mix of stablecoins, ETH, BTC, and other top altcoins, and users can earn interest by minting COVOLP Tokens in exchange for adding liquidity to the pool. The pool also receives 70% of all platform-generated fees making it an attractive option for earning interest on crypto in the DeFi space. Platforms that offer crypto savings accounts generate returns by lending your crypto to other users. The borrowers must pay back their loans with interest, and the crypto lending platform passes some of the interest earned on to you.
The biggest concern is called impermanent loss, which can happen when the values of the tokens in a pair don’t move at the same rate. In some cases, you might have done better by holding the tokens rather than providing liquidity. Most people are familiar with centralized exchanges like Coinbase or Kraken. Another kind of exchange, called a decentralized exchange or DEX, lets people swap tokens from liquidity pools.
Binance – the world’s largest crypto exchange, offers many different ways to earn interest on crypto. First, there is the ‘Simple Earn’ feature, which functions as a crypto savings account. Dozens of cryptos are supported, and interest rates are competitive. For example, investors can earn up to 49% on a 120-day lock-up period when depositing Ape Coin.
The comparison takes into account important factors such as ease of use, reputation, supported currencies, crypto interest rates, pay-out frequency, fees, security and customer support. These savings accounts offer higher yields because they are riskier. For example, they could limit how quickly you can withdraw your assets and, in times of difficulties, they might not let customers withdraw their assets at all.
Vauld, for example, offers 4.6% – 6.7% APY on Bitcoin and upwards of 12.68% APY on other tokens. So how can you go about enjoying this kind of profit on your cryptocurrency holdings? Let’s say that you deposit one Bitcoin (valued at $50,000) in an account on Vauld where you can earn a whopping 4.60% – 6.70% APY compounded weekly. For the sake of this example, we’ll assume you leave your Bitcoin on deposit for one year (52 weeks). We also offer powerful application programming interface (API) integrations that give enterprises of all sizes and types the power to offer crypto services to their users. At Vauld, not only will you have access to some of the highest interest rates in the business, but you’ll also have access to crypto borrowing and trading features you won’t find anywhere else.
Without real earnings, the ultimate value of these tokens will likely trend toward zero. The inventory for these liquidity pools comes from other traders who earn a fee every time a swap takes place in the pool. For example, the top pool by volume on Uniswap (the largest DEX) currently earns almost 10% APR from swap Hexn fees when using the most common fee level (0.05%). Blockchains like Ethereum use proof of stake to validate transactions on the network. Basically, people commit crypto to a validator (a computer running specialized software), and if the validator breaks the network rules, some of that staked crypto is at risk.
A crypto interest account is generally a DeFi platform’s service that lets you earn interest on digital assets you’ve deposited and agreed to lend out in exchange for a return. If you don’t want to invest in stablecoins whatsoever, you can still use MyConstant to earn higher yields on USD. Instead of earning less than 0.5% on USD in a savings account, MyConstant offers 4% APY on USD. Another great feature for both crypto and fiat currency, MyConstant has no lockup times –– you can access your investments whenever you need. While there are plenty of options to earn interest on your digital assets, there are 2 main ways in which you can do so.
The network’s sole purpose according to its founder is to increase the adoption of crypto on a global scale by making it easy for individuals to access. These services allow you to earn interest on Bitcoin and crypto without having to trade the markets using an exchange. Some companies have minimum times to keep your crypto in your savings account. This exposes you to more risk of price volatility in the crypto market. Although you’d be earning interest, the value of your investment would be worth less if the cryptocurrency were to fall in value. Another easy way to get some free crypto is with Coinbase Learn.
Of course, Bitcoin isn’t the only cryptocurrency you can earn interest on. You can deposit other kinds of tokens into savings accounts, but some of them may offer you more options beyond this. Lending platforms may offer the choice between flexible and fixed-term savings accounts. If you want to earn interest on your Bitcoin, the easiest and most popular way is to sign up for a crypto savings account. These accounts often provide much higher interest rates than a traditional bank account, they also come with more risk.
Because, while you’re waiting for the price of crypto to go up, you can enjoy the benefits of passive income. Once the funds are deposited into your crypto yield account, the first weekly payment period begins and you earn free crypto. The exact rates of interest, depending on the user’s Loyalty tier, and bonuses applicable for fixed terms and/or earning in NEXO Tokens, are indicated on the Nexo platform.
Essentially, you’re lending your assets to margin traders on the platform, and they pay interest to you in return for borrowing your funds. An increasing number of other financial service companies and cryptocurrency platforms provide these types of accounts. Nexo and Crypto.com are among companies offering greater interest rates to cryptocurrency holders who lock their assets away for weeks or months. However, the drawback with this type of savings account is that you can’t withdraw or sell your crypto during that period. Primarily, it will be used for lending it out to earn high returns, some of which will be paid to you as regular interest payments.