Earning interest on cryptocurrencies can be a great way for passive investors to involve themselves in the crypto market. Even though this may seem too good to be true, investors can earn money off of their crypto by simply holding onto their currency. In this article we go in depth how you can earn interest on your cryptocurrency.
Can You Earn Interest on Cryptocurrency?
Yes, just like other currencies, there is an option for those to earn interest off their cryptocurrencies. Similarly to other saving accounts, there are interest-bearing accounts specifically for cryptocurrencies. These can be found on cryptocurrency platforms and depending on the platform and cryptocurrency, these interest rates can vary.
How Does Earning Interest on Crypto Work?
As stated above, earning interest off of crypto can be similar to those who have a traditional savings account. However when it comes to crypto, the interest is based on the market’s effects.
Evidently since crypto is a highly volatile market, these interest rates are significantly higher than the traditional savings account yield.
Pros & Cons of Earning Interest on Crypto
Prior to earning interest on crypto, one should know what they are getting into by fully understanding the perks and downfalls that come with it. Having an interest-bearing account for crypto, such as Coinbase’s savings account, can be a great opportunity for those who wish to hold on and utilize the platform’s digital wallet.
Especially since the rates fluctuate within the crypto market frequently, some may be able to make a sizable return. However, the downside is that there is not going to be a consistent rate of interest which can be frustrating for users.
4 Steps to Start Earning Interest on Crypto
Investing in crypto is a great opportunity, why not have your investments continuously working for you? Here we lay out 4 easy steps to start earning interest on crypto.
Step 1: Research and Compare Platforms
Prior to investing into an account, one should look at various platforms to see which one is most aligned with their investment goals. One should look into what interest bearing crypto wallets have high interest rates, how many types of cryptocurrencies they provide, their user experience, and the built in fee system of opening an account.
For example, Coinbase’s digital wallet is free of charge, the platform offers more than 50 currencies, and has an interest rate of up to 4%.
Step 2: Open an Account
After doing your due diligence on the platform, start your journey by opening an account. In order to do so, you will need to have some personal information at hand.
Platforms will ask the investor for a government-issued photo ID to prove they are over 18 years old and for a phone number or email. Additionally, you will have to add personal information such as date of birth, address, last 4 digits of social security number, current occupation, and employer.
After filling out this information, your account will be ready for use.
Step 3: Deposit Your Cryptocurrency
Once your account is ready for use, you can purchase cryptocurrency through the platform or try to transfer your already existing cryptocurrency. Depending on the platform, the guidelines for these interest-bearing accounts may vary.
This is due to the fact some platforms only support a few dozen types of cryptocurrencies. Prior to opening an account, make sure your desired cryptocurrency is supported via platform.
Step 4: Start Earning Interest!
Now that your crypto is in the account it can start bearing interest. These easy 4 steps can lead to you gaining a sizable return on your cryptocurrency. Depending on the platform you chose to open an account with, this interest can fluctuate.
Things to Consider With Interest Earning Crypto Accounts
When doing your research on crypto platforms, take into consideration some of the platform’s features to get a better picture of whether this platform can best fulfill your investment goals. These factors can vary from fees to withdrawal times.
Floating Interest Rates
This type of interest rate is a rate of interest that changes or is subjected to change every quarter. Since crypto platform’s do not use a fixed interest rate, which is common in traditional loans or bank accounts, these platforms use a floating interest rate.
Due to this, the interest rate fluctuates and does not function at a fixed rate. When researching a platform see what they say regarding the range of interest offered on their interest bearing account.
Commissions & Fees
When opening an account take into consideration the platform’s fee structure. Some platform’s require a maintenance fee, account minimum, and or a withdrawal fee. However, this differs depending on the platform’s fee structure.
Various platforms do not require account minimums, but research these costs prior to investing.
Can I Withdraw My Money at Any Time?
Usually, crypto platforms allow you to withdraw your money at any time. The withdrawn crypto is turned into fiat currency and deposited into a bank account.
You can often choose the fiat currency of preference (such as USD or EUR), and wait for the deposit. The speed of this deposit can take from one to fifteen days depending on the bank processing time.
Why You Should Start Your Crypto Investment Journey
Earning interest on cryptocurrency is a great way to passively gain income off of your investment. When opening an interest-bearing account, research what cryptocurrency the platform supports, what the platform’s fee structure is like, and whether the account aligns with your personal investment goals.
Coinbase is a great place to start for those who wish to open an interest-bearing crypto account. To learn more about Coinbase and what the platform offers, click here.
Frequently Asked Questions
You can earn interest on crypto similarly to how you do in a traditional savings account. However, instead of the account having a fixed rate, crypto savings accounts tend to have a floating interest rate.
Cryptocurrencies such as Bitcoin, Ethereum, and Ripple offer interest rates between 4% to 8%. Additionally, stablecoins such as USDT, USDC, and DAI can offer interest as well.
Currently, the crypto with the highest APY is USDC at 8.25%. However, Bitcoin is a close second offering 7.2% APY.