With the increasing inflation rates, the global interest rates remain low to earn investors decent returns on their investments. Consequently, many people are looking for an alternative way to grow their wealth. Cryptocurrencies are becoming increasingly popular investment assets with huge gains in recent years on different coins. Another way of building your investment is earning interest on the crypto assets you own.
Generally, the annualized interest rates for crypto investments exceed 4% for Bitcoin and 8% for stablecoins. Some altcoins, like HI, may offer rates as high as 20% APY. Your initial investment can increase even more substantially when compounded over a few years.
Different ways to earn interest on cryptocurrencies
You can earn interest on your digital currency assets through staking, which is available on specific coins, or lending platforms. Simply put, staking involves locking up digital tokens to be used in validating transactions on a proof-of-stake blockchain network. By supporting the security, integrity, and continuity of a blockchain network, validators (stakers) earn more of the cryptocurrency as a reward.
Lending platforms is another way of warning interest in your cryptocurrency. Such platforms use the investors’ money to lend to other users looking to borrow funds. The interest gained from the borrowers is distributed to the investors (lenders).
The first way to earn interest in your cryptocurrency is through staking. Simply put, staking involves locking up your portion of your funds to help maintain a specific network. Blockchain networks that support staking use Proof-of-Stake (PoS) consensus mechanism and include Ethereum 2.0, Cardano, Polkadot, Avalanche, and Solana.
As a reward for helping in maintaining the network, the investors receive interest. The annual interest rate is determined as the annual percentage rate (APR) for simple interest and annual percentage yield (APY) for compounded interest. The interest rate varies greatly between coins and ranges between 0.05% and 100% annually.
Some tokens may offer a very high-interest rate but present higher risks. Therefore, you should do some research before deciding which coin to stake.
The disadvantage with staking through an exchange is that it involves giving up control of your funds to the exchange. This may put your funds at risk in case anything happens to the exchange. Exchanges may be hacked or go out of business. In addition, most exchanges charge a fee for offering you the staking service.
Ensure you consider the fees that the wallets changes. Some may not even charge staking fees, hence perfect, especially for beginners. However, you should also remember that in most cases, wallets support a small variety of staking coins.
2. DeFi and Yield Farming
Another way to earn interest on your crypto asset is to invest in DeFi and yield farming projects. DeFi is short for decentralized finance, which are financial services that are controlled by a distributed network of independent computers rather than a centralized authority. DeFi uses pre-defined rules defined in computer codes (smart contracts).
Many DeFi projects allow users to lock up their holdings to earn interest. The locked-up funds can be put to different use, including staking, lending, supplying liquidity to decentralized exchanges (DEX), and farming.
3. Cryptocurrency Savings Account
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.
Savings accounts may vary in the interest they offer; hence, it is important to research to find the best account with the highest return. For example, hi.com offers up to 12% APY on stablecoins.
The main drawback with a crypto savings account is that you have to give up control over your funds to a third party. However, with these accounts, you do not need to worry about the lockup period. Additionally, a crypto savings account is a good alternative for coins that do not support stakings, such as Bitcoin and Ethereum 1.0.
Again, you need to do research on different coins and the interest you can earn on them as well as the fees you will be charged. Remember that not all platforms that offer high interest are safe. Sometimes, high-interest rates may signal increased risk. It may be a less reputable company or a new, untested coin.
How to earn interest on cryptocurrency?
Every investor hopes for the best interest rates. Therefore, an investor will first compare the interest rates of different cryptocurrencies and their platforms. You can see the interest rates you will earn on different cryptocurrencies directly on their websites on the respective platforms.
The interest for most crypto savings accounts is mainly floating rates. Such interests may vary continuously based on the demand and supply for crypto loans. This qualifies the fact that investments in cryptocurrency are very volatile.
You can follow the following simple steps to open an interesting account and start earning your interest.
Step 1. Open a Crypto Account
Opening a crypto interest is the first step in ensuring you earn interest in crypto. Whichever platform you choose, you will be required to register an account with that platform. For example, to begin earning interest with the Hi.com platform, you need to sign up with your email address and a password of choice. You will also need to choose your preferred cryptocurrency.
Step 2. Verify Identity
At this stage, you are required to verify your identity. Depending on the platform you have chosen to register in, the different verification processes will be required. Financial companies are required to implement Know-Your-Customer (KYC) in cooperation with the Anti-money laundering policy and the effort to combat the financing of terrorism. You will supply personal details such as name, nationality, residential address, and date of birth at the basic level. And finally, you may be required to upload a copy of the government identity card.
Step 3. Deposit Funds
After verifying your account, you can now make deposits of the number of funds you wish. Depending on the platform, you can deposit fiat currency or digital assets. Additionally, some platforms require a minimum deposit.
Step 4. Earning Interest
Once the deposit is completed, you will expect your funds to begin earning you interest depending on the interest terms provided by the platform you invested in. Factors such as the kind of interest, the period of interest, and other payment terms apply.
Popular cryptocurrencies are particularly attracting many investors due to their high liquidity. Such coins may attract less interest yet present low risks. Cryptocurrencies such as BTC, ETH, LTC, and BNB, may be attractive to beginners even though they attract lower interest rates.
Although the interest rates fluctuate based on the supply and demand in the market, most larger coins have relatively stable annual percentage rates (APR). For example, Bitcoin interest rates vary from 4% to 8%.
Where to earn interest on crypto?
Many cryptocurrency lending and exchange platforms offer crypto lending services that can earn you a decent crypto income. However, all these platforms may differ in different factors, including interest rates, availability in some locations, minimum lending amount, and the supported coins for lending. With all these factors to note, it can be difficult deciding which platform to use. Additionally, there is the issue of trust – you may not know which site to trust or if the interest rates are misleading. Here are some top accounts offering the best interest rates.
1. Hi.com- Best Crypto Interest Account
Hi.com has one of the highest interest rates compared to all other interest accounts on crypto. It offers up to 40% APY on Hi dollar (HI). Bitcoin and Ethereum attract 6% and 8% APY, respectively, while Dogecoin has an APY range of between 0.5% and 5%. Hi.com also offers savings account for stablecoins, which attracts 11% APY. The platform is accessible through mobile, PC, and web apps.
Besides the decent interest rates, Hi.com also offer other services that can help investors looking to deposit their funds for interest. It has an exchange platform that allows users to buy tokens using fiat currency. You can also quickly cash out your interest in fiat through the exchange.
Crypto.com has become one of the top crypto interest accounts, offering interest on over 45 leading cryptocurrencies. It also caters to upcoming and new cryptocurrencies, making most investors excited about it. Other services the platform offers include; cryptocurrency exchange where you can trade crypto, NFT marketplace, debit cards, and others.
Crypto.com is very enticing and attractive as it offers up to 14.5% interest rates for coins like the USDC. The platform also allows you to opt for flexible (enables you to withdraw money any time you want) or fixed 1-3 months deposit terms.
AQRU is an upcoming interest account that enables users to earn interest in crypto coins like BTC, Tether, ETH, USD coin, and DAI. Here, investors can earn up to 12% per year, making it a competitive crypto interest account. AQRU allows you to deposit fiat currency if you do not have cryptocurrency, making it a unique account. The platform uses Moonpay to convert your fiat currency to crypto and enable you to start earning interest. AQRU also supports depositing fiat using a credit or debit card free.
AQRU ensures the safety of your assets. Your coins have full custody while invested on the platform. Another safety mechanism includes a series of insurance products that fully protect investors’ principal in case of hacking. The account offers a web platform and mobile apps for iOS and Android. You can withdraw your money without penalties and no fee when you withdraw fiat.
This is one of the top crypto interest accounts and home to the largest cryptocurrency collections globally. The Binance primary exchange attracts the most daily trading volume. Some services offered include loans, educational courses, leveraged products, and its own crypto BNB.
Binance offers one of the best crypto interest platforms for supported coins and yields. This is especially useful for experienced crypto users who want to invest aggressively in up-and-upcoming projects with higher interest rates in exchange. There is usually a high risk in these coins.
Binance offers both stakings that guarantee your principal and the one that does not. These coins can offer interest rates of up to 178% since your risk is significantly higher when your initial investment is not guaranteed.
5. Coinbase Account
The popular Coinbase exchange allows you to earn passive income on your crypto savings even after putting on hold their interest accounts last year. This is a relatively conservative account with only six coins and interest rates up to 5% making it appropriate for beginners rather than those investors seeking to maximize their potential returns.
Staking done on the Coinbase website will require you to lock up your crypto tokens for a certain period. During this period, Coinbase will pay you rewards in interest. Some of the supported cryptocurrencies for staking include Ethereum, which yields 4%, Tezos (4.645%), DAI (2%), Algorand (4%), and USD (0.15%) are supported at Coinbase to stake. You must have a verified account with a Confirmed Tax Identification Number to begin staking with Coinbase.
What to consider when selecting where to earn interest on crypto?
There are many factors to consider when choosing the best way to earn interest. Here are some questions you should ask:
- The terms of the interest account when it comes to withdrawal of your investment. Dose the platforms require locking up cryptocurrencies for a set period, or you can withdraw them anytime.
- The type of digital token you are planning to invest in; are you planning to earn interest cryptocurrencies (bitcoins and altcoins), stable coins, or both?
- Asset diversification; do you want to invest with many coins or just a few?
- The number of assets you want to earn interest from; a large number of coins may lead to lower interest rates.
- Owning the platform’s native coins, do you want to earn higher interest by owning native coins of the lending platform?
Pros and Cons of Earning Interest in Cryptocurrency
Offering interests of over 10% is something unheard of in the traditional finance system, but through depositing your funds in crypto, companies can offer these interest rates even higher. With these come pros and cons of earning interest in crypto:
Pros of Earning Interest in Crypto
- Low minimum lock up time on your crypto coins
- No minimum funds are required for an interesting account
- When you appreciate your crypto asset, interest grows
Cons of Earning in Crypto Interest
- Depreciation of your crypto will have a reduced interest effect on your funds
- There is still low regulation in the industry, making scams more common
Many crypto platforms have come up with a more enticing way to help their users generate crypto income from earning interest. This has led to the establishment of different crypto interest accounts. Most investors will be interested in maximizing their crypto earnings, choosing the best platform with the highest interest offers. hi is one of those leading interest accounts with the best deals.
Hi.com is offering the best interests on staking stablecoins (12%) and other cryptocurrencies, 5.5% APY on Ethereum. The native token, HI, earns even higher interests of 20%, making it one of the highest in the entire crypto interest markets. Despite offering fewer tokens compared to other platforms such as Celsius, hi.com still offers interest on some of the major tokens, including ETH, BNB, BUSD, DOGE, and USDT.
Cryptocurrency investment can be risky, especially if you are a beginner. You have to grapple with the volatility of the market, legal issues, and even fraud. Nonetheless, it is still one of the highest-earning investment niches in the finance world.