The currency you store in the bank earns interest. Straightforward enough. So why doesn’t digital currency, crypto, earn interest as well? Well, recently, several platforms have begun offering ways to earn passive income off of your cryptocurrency, allowing you to put your digital wallet to use online.
While certain risks are associated with using online interest-earning crypto platforms, these typically are no greater than having your crypto in an online wallet anyway.
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What is a Crypto Interest Account?
A crypto interest account is an online account that allows you to earn interest off of the cryptocurrency that you have in it. This is most commonly done through an existing provider of crypto facilities that has an option to put your currency or digital assets in a specific account.
Crypto interest accounts allow you earn interest by simply staking your crypto, similarly to traditional savings accounts. However, different crypto wallets offering interest on your crypto have different APRs (Annual Percentage Rates), meaning you will have to choose a provider that offers the highest APR to earn as much interest as you can.
Same way as with different crypto wallets, the interest you can earn also varies depending on the coin you are staking. For example, stalking Bitcoin may give you less interest than other coins, such as Ethereum.
Crypto interest accounts, or sometimes specifically Bitcoin interest accounts, came into existence only in the last decade, meaning they’re still relatively new to the financial scene. But they’re definitely viable ways to store and earn interest off of your cryptocurrency.
How Much Interest Can You Earn From Your Crypto?
Crypto interest accounts have been hailed for their seemingly remarkable interest rates compared with traditional savings accounts in centralized financial organizations. While U.S. banks tend not to offer APY (annual percentage yields) greater than 1%, nearly all online crypto platforms offer better yearly returns.
As mentioned earlier, different digital currencies tend to have different yearly returns. Two of the most common, Ethereum and Bitcoin, among others, have APYs starting from 6% when staking them, while other cryptocurrencies can have APYs up to 17%.
While the returns on Bitcoin and various other altcoins do seem incredible, it’s important to remember that all online platforms and digital accounts carry risks with them. So it’s important to carefully choose a provider you want to open a crypto interest account with, one that is safe.
Invest in over 30 cryptocurrencies from your checking account with no trading fees with the Current mobile app crypto feature.
Titan is an investment platform with a team of experts actively managing your portfolio based on your chosen strategy, including cryptocurrencies.
Alto IRA allows you to invest in stocks, bonds, mutual funds, ETFs, real estate, cryptocurrencies, and even gold for your retirement.
Benefits of Crypto Interest Accounts
A number of benefits come with using a crypto interest account over a standard centralized banking system.
Profitable Returns Over Time
First, as discussed above, the APYs for digitally stored cryptocurrencies tend to be significantly higher than those of regular currency, allowing for more profitable returns over time, especially when you’re depositing large amounts.
Maintain The Value of Your Cryptocurrency
Crypto savings accounts allow you to maintain the value of your cryptocurrency for the duration it’s being stored. This means that if the price of your cryptocurrency increases, you will see that increase in value when you choose to sell or exchange your crypto.
The exact returns you receive can therefore be difficult to expect and will significantly vary depending on the market state, your choice of cryptocurrency, and the type of crypto you’re using (for example, whether it is a stablecoin or a fiat coin).
Get Paid in a Standard Currency
When taking interest from a crypto interest account, you usually receive your interest in the form of additional cryptocurrency of the type you put into it, giving you the possibility of bolstering your crypto portfolio using your existing digital wallet.
Flexible Access to Your Digital Assets
A large number of crypto interest accounts don’t have fixed lock-up times, meaning that you’re able to withdraw your finances at any time to maintain the flexibility of your digital assets. However, some platforms will offer you higher APRs if you choose a fixed term to stake your coins, allowing you to earn more interest on your crypto.
Interest Paid Daily
You can expect the highest rates on crypto accounts than traditional savings accounts. Most crypto interest accounts will pay your interest weekly or monthly directly into your account, based upon the yearly percentage received, some will even pay your interest daily.
Differences Between Crypto Interest Accounts and Traditional Savings Accounts
While crypto interest accounts and traditional savings accounts are effectively the same in principle, in actuality, there are a few differences that anyone looking to use a digital interest account should be aware of.
FDIC Insurance
Given that crypto interest account platforms aren’t insured by the Federal Deposit Insurance Corporation (FDIC), if the platform that administered the account declares bankruptcy or collapses, you have no definite way to ensure that you’ll have your initial deposit or your interest returned. For this reason, it’s important that you research the site that you want to store your cryptocurrency with.
Withdrawing Money
Most online decentralized crypto platforms using a crypto interest account offer the ability to withdraw your funds from it at any time. This allows you to maintain the adaptiveness of your portfolio in the case of an unexpected market event. This, therefore, makes you resilient to changes in crypto. This is incredibly different from a traditional term deposit or long-term savings account, which requires you to “lock-up” your funds for an extended time.
Interest Rates
Generally, the interest rate received for storing your cryptocurrency in a cryptocurrency savings account is significantly higher than when using a traditional savings account, with APYs for Bitcoin and Ethereum being higher than 6% in some cases. This makes investing with digital currency a highly attractive option, especially for people looking for high-yield options.
