Some Crypto Owners Earn 25% Interest By Lending Coins
Want to earn passive income while holding coins? Crypto lending is an option.
If you’re a crypto investor, crypto loans can provide you with immediate returns – and you don’t even have to sell coins. At the time of writing, the KuCoin cryptocurrency exchange offers annual percentage returns (APYs) of over 25% if you are willing to lend your crypto.
Is it too good to be true? The best high yield savings accounts pay a lot less interest, and crypto loans are definitely a riskier way to keep your savings. When it comes to crypto, returns are not guaranteed. Here’s what you need to know.
Find the right exchange
Not all cryptocurrency exchanges allow you to lend your crypto. Every exchange is different and interest rates can vary widely depending on the type of loan or the coin you are lending.
The scholarships offer two main types of loans: fixed and flexible.
Ascent’s Picks for Top Online Stock Brokers
Find the best stock broker for you from these top picks. Whether you are looking for a special sign-up offer, exceptional customer support, $ 0 commissions, intuitive mobile apps or more, you will find a broker to meet your trading needs.
See the choices
- Fixed. Think of fixed loans like a bank CD. It locks in your deposit at a predetermined rate for a set period of time, typically seven to 90 days. The reward for not touching your crypto is that it earns higher interest.
- Flexible. Flexible loans are more like a savings account. You can withdraw your crypto at any time, but the return rates are lower.
For example, Gemini Earn is a flexible loan provider. It pays a daily APY, so you can earn compound interest on your coins. The platform partners with accredited third-party borrowers and you can redeem your coins at any time.
Binance, the largest crypto exchange by volume, offers several international investment products through Binance Earn, for both fixed and flexible loans. Unfortunately, this is currently not available in the United States.
Then there are exchanges like KuCoin which provide a market for peer-to-peer (P2P) lending. Users can either set their own fixed lending rates or lend at the current market rate.
With any exchange, it is important to know that your funds are safe. Not all exchanges follow the same compliance guidelines set by U.S. regulators – one of which is the Know Your Customer (KYC) rules that verify customer identities and limit criminal activity. Clients based in the United States may risk closing their accounts on exchanges that do not follow KYC rules.
Choose your parts wisely
Although there are over 9,000 cryptocurrencies, according to CoinMarketCap, most exchanges only allow users to lend a few dozen of them. So the question is: what coins should you lend? It depends on your desired returns, market conditions and your personal risk tolerance.
There are two main crypto lending strategies to consider. You can earn interest on stablecoins or cryptos like Bitcoin that you plan to hold. Stablecoins, like USD Coin (USDC) and Tether (USDT), aim to anchor their value on an individual basis to US dollars – hence the name. Regardless of market volatility, the price of stablecoins remains unchanged, making it a low risk option. But not all stablecoins are backed by the same reserve assets, which raises the question of their actual stability.
Bitcoin and altcoins are very volatile. As such, the amount you earn in interest can be unpredictable. Lending them may be of interest to investors who wish to keep their coins while being paid. But it also means that any change in the price of crypto will affect their income. Investors who use fixed lending services should be prepared for sudden changes in value, as they will not be able to trade coins that are stuck for specific periods of time.
Buy your first shares: do it the smart way
Once you have chosen one of our top rated brokers, you should make sure that you are purchasing the good stocks. We believe there is no better place to start than with Stock market advisor, our company’s flagship stock selection service, The Motley Fool. Every month, you’ll get two new stock picks from legendary investors and Motley Fool co-founders Tom and David Gardner, along with 10 Starting Stocks and Best Buy Now. Over the past 17 years, Stock Advisor’s average stock pick has returned 565%, more than 4.5 times that of the S&P 500! (as of 04/01/2021). Learn more and get started today with a special discount for new members.
Which pieces bring the most interest? Stablecoins currently offer the highest interest rates, between 5% and 25% on most exchanges. The rates for Bitcoin and Ethereum are around 1% to 3% APY lower. Why is it? When the crypto market is bullish, there is a higher demand for stablecoins from investors who plan to go long. The reverse is generally true in a bear market, when investors are looking to borrow cryptocurrencies to go short.
Risks and costs
In crypto-land, returns are not guaranteed. Most crypto exchanges don’t have the same protections as traditional FDIC-insured bank accounts. FDIC insurance covers consumers against losses of up to $ 250,000 in the event of bank failure or theft of funds. Some exchanges, like Gemini, control their borrowers through a rigorous risk management process. Others, like KuCoin, don’t. However, KuCoin claims that lenders can still get a full refund through its insurance fund in the event of borrower default.
With high returns comes high risk – trades can and have failed. The parts were pumped out and dumped. As with any investment, it’s not a good idea to risk the money you might need in the short term that you can’t afford to lose.
Then there are the fees, which can add up quickly. Most exchanges charge a fee to buy crypto, a fee to sell crypto, and a fee to withdraw crypto. And there are blockchain fees you may need to pay to make transfers from wallets and exchanges. If you’re not careful, fees can dramatically reduce your income and put you in the red before you even start lending. With this in mind, it is best to set a loan schedule. This way, you can calculate whether the interest you might earn will cover the costs.
Crypto loans can offer mind-blowing interest rates, allowing investors to earn passive income on their coins. But make sure you can bear the risks.