How To Earn Interest On Your Crypto

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If there’s one thing that frustrates people, it’s watching their hard-earned savings stagnate due to low interest rates.

As such, a lot of people are now looking for ways to make their money work harder.

One such option is crypto interest accounts, which pay interest on both cash and any cryptocurrency you hold in your portfolio.

Whether you’re a crypto-cynic and believe the whole thing is a speculative bubble, or you have faith in blockchain technology and how it’s changing the world, there’s no arguing the returns are eye-wateringly high compared to banks.

High interest rates offered for more risk

Some of the mainstream crypto accounts, such as Nexo, can offer up to 12% – if you’re prepared to take the extra risk. These accounts do not offer any protection, such as the Financial Services Compensation Scheme (FSCS) of £85,000 which you have on your bank and building society savings if you’re based in the UK for example.

As such, you should never invest more money than you’re prepared to lose. I believe you should follow this advice with all investments that you make.

There are two main options for you to consider: crypto interest accounts that pay interest on your cash, or, if you’re after a higher rate, pay returns in cryptocurrency.

Cash savings usually offer the lowest returns, whereas the highest rates of interest can be achieved by holding what are known as stablecoins, such as Tether (USDT), with other cryptos falling somewhere in the middle.

Check out our Nexo review here >>

Many of the companies that are operating in this space, make their money from offering easy access loans. They also offer credit cards offering crypto bonuses.

How to open a crypto savings account

Opening a accounts on crypto interest earning platforms is generally a simple process and is very similar to setting up a trading account. You’ll need to provide some personal details and a photo ID to comply with Anti-Money Laundering (AML) and Know your Customer (KYC) rules.

Crypto accounts often pitch themselves as being digital banks and can usually be managed by either desktop or mobile apps.

Interest earning account security

When it comes to the security of your holdings, this is potentially a point of concern if there’s another global economic downturn because the business model is based on loans.

Hacking is another issue that may put people off, with many well-publicised cases of cryptocurrency holders having their coins stolen from exchanges.

A lot of people ask whether it’s safe to entrust their cash or crypto to companies like Nexo and others in this space.

My view is that as the cryptosphere is still largely unregulated there’s always going to be a certain degree of risk with investments of this kind, and there have been some high-profile companies that have folded.

Like any investment, it’s essential that you do your due diligence beforehand and understand the risks of the financial product you are planning to use.