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Knowing how to earn interest on crypto is beneficial in many ways, one of which is having a steady passive income stream. It’s a great way to put your extra money to work for you while it builds up over time.
Many crypto platforms now offer interest-bearing accounts with competitive rates. The best part is that you can gain more when the market increases.
This guide will help you understand how to earn interest on crypto. We’ll also show you to best platforms to get started in Canada and how to open an account.
When looking for how to earn interest on crypto, your first move is to find a platform that offers a crypto savings account. Some popular options include Crypto.com, Binance, Nexo, and Coinbase.
However, you must consider several things before deciding which platform to use. This part of our guide on how to earn interest in crypto will help you decide what to look for in a savings platform.
Most platforms affect popular cryptocurrencies like Ethereum and Bitcoin. Only a select few, however, accept lesser-known cryptocurrencies like Doge and Avalanche. Hence, you should ensure that your desired platform accepts the digital coins you plan to deposit.
The average interest for most platforms goes from 3% to 8%; others offer more. Some platforms offer fixed interest rates, while others offer tiered interest rates that vary with your deposited crypto assets. Since interest rates hardly change, you should consider these factors before deciding on a crypto platform.
Do you plan on withdrawing your cryptocurrencies a month after saving them, or do you just decide on a whim? Some crypto savings platforms require investors to leave their funds for a stipulated time before withdrawals. Others specify the maximum number of times an investor can withdraw in a month.
These are some of the few withdrawal restrictions, and many cryptocurrency savings sites use one or more of them. So, you should review the site’s terms and conditions to see if you can abide by their withdrawal terms.
This is the minimum required in an account before you can start earning interest on it. Some platforms designate an amount for this, while others don’t have any. So, if your desired crypto savings platform comes with a minimum amount, ensure that you’re okay with it.
You need to open a crypto savings account to start earning interest. The next step is to compare the interest rate offered on each cryptocurrency. Then you can deposit your crypto and start earning interest.
Let’s go over the basic steps to follow when looking for how to earn interest on crypto. This is just a general procedure that you’ll find on most platforms.
You should create a free account at a reputable exchange like Coinbase, Gemini, KuCoin, Binance, etc. This process is easy and requires you to submit your email address, password, and desired currency. Then you’ll need to accept some terms and conditions, and you can create your account.
Most sites require an identity verification process after this to fulfill designated Know-Your-Customer (KYC) requirements. You’ll need to enter your full name, date of birth, nationality, residential address, and even upload a government-issued Identification (ID).
Once you’ve deposited your crypto assets, you can compare the interest rates offered on different cryptocurrencies. Note that the rates these savings accounts offer are typically floating interest rates. They fluctuate based on the demand and supply of crypto loans.
On average, you can enjoy interests from 5% to 9%. These are just average figures, as companies like Binance offer up to 25% APY on specific coins. However, you should be wary of any platform offering above 25%, especially if you’re new to how to earn interest on crypto.
You can also get low interest rates like 1%, 0.7%, 0.5% or even 0.1%. Nevertheless, it’s almost impossible to find companies offering such low figures. These rates are what differentiate high-interest savings accounts from low-interest savings accounts.
The next step on your journey to know how to earn interest on crypto is to deposit your funds. This could be Canadian or US dollars, Bitcoin, Ethereum and other major altcoins.
Some platforms also have exchange features that allow you to exchange your fiat currency for the accepted cryptocurrency. Others can also allow you to convert your digital coins into those they accept.
After depositing your funds, you’re free to start earning interest on them. You can just scroll to your account’s dashboard to see your interest anytime.
We’ve gone through the basics of how to earn interest on cryptos. Now let’s take a look at some of the best platforms available out there.
Although there are a lot of crypto savings platforms out there, there are some that stand out. These sites offer the best user experiences, a wide range of accepted cryptocurrencies, and a variety of other benefits.
Some of the best crypto savings platforms that you can consider are:
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Nexo is a go-to platform when looking for how to earn interest on crypto. The crypto loan service provider also allows customers to earn interest just by storing their digital coins on the platform. Nexo is active in over 200 jurisdictions worldwide and accepts more than 40 fiat currencies.
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Germini is another platform to consider when searching for how to earn interest on crypto. It offers an array of services, including crypto lending, trading, and investing. Gemini has been around since 2014 and is one of the oldest exchanges in the market.
Gemini is a popular cryptocurrency exchange that recently started the Gemini Earn service. This allows users to earn interest on the digital assets stored on their platform. Its recent product, Gemini Earn, provides competitive rates for investors who want to earn interest on their crypto holdings.
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Coinbase is a leading cryptocurrency exchange provider in Canada. The company started in 2012 in San Francisco, USA, and currently serves over 100 countries.
Coinbase offers both crypto interest accounts and crypto staking accounts. They also offer one of the most user-friendly mobile crypto wallets, the Coinbase Wallet.
Coinbase is worth considering when looking for how to earn interest on crypto.
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Binance offers one of the largest collections of cryptocurrency alongside its native token. Besides serving as a savings platform, they also provide educational courses, debit cards, loans, and leveraged products. The Binance wallet is also available for investors who want to store digital currencies.
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Crypto.com is another top crypto savings platform to consider if you’re looking for how to earn interest on crypto. The company was founded in 2016 and with its headquarters in Hong Kong.
Crypto.com operates as a global payment gateway, wallet, and cryptocurrency exchange. Its crypto savings platform supports a few dozen tokens, including stablecoins and large-cap cryptocurrencies.
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BlockFi is a crypto savings platform that also doubles as a lending site for Canadians. This is one of the safest crypto investment platforms, with an insurance policy from BitGo. The loans that they offer customers are dependent on the amount of collateral that the customers can deposit.
Crypto interest is the extra incentive you get for depositing your tokens into a crypto interest account. These extra coins accumulate over time, contributing to your passive income. You can also withdraw them or can use them to purchase things.
Interest is a benefit a bank or other financial institution pays its customers for using its services. For example, if you have a savings account at a local bank, they may pay you interest every month for keeping your money there.
A crypto interest works the same way. The platform providing the interest-bearing account pays you a small monthly interest as long as you keep your funds deposited into the account.
Earning crypto interest isn’t like HODL (Hold On for Dear Life). That’s because this strategy protects your asset and grows it too. It’s also a much faster method of increasing the value of your assets than HODL.
When you deposit your funds in a crypto savings account, the company can use them for several purposes. They could use it to validate blockchain transactions or lend it to other customers.
We cannot overemphasize that crypto savings accounts are similar to their traditional cousins. As such, your cryptocurrency savings platform also uses your deposited funds for similar purposes.
Customers that borrow cryptocurrency from these platforms get part of your funds. When they pay back, they do so with interest, and you get your cut.
This also happens when the platform stakes your funds on the blockchain to verify transactions. After a transaction is validated on that blockchain, a certain percentage is taken as a transaction fee. Part of the transaction fee belongs to the individuals that staked their funds, while the blockchain takes the other.
Earning interest on crypto isn’t completely risk-free. So, we can’t say it’s completely safe. However, compared to the risk in other crypto trading activities, it’s much safer.
Depositing crypto assets in a savings account comes with the risk of your assets losing value while they’re stored. However, this is a risk that all cryptocurrency owners face and isn’t just restricted to owners of crypto savings accounts.
There’s also the platform’s safety to consider when storing these coins. If a hacker eventually gets through the security measures of such platforms, you stand to lose your funds.
Fortunately, most savings platforms run as dApps on-chain, allowing them to benefit from the blockchain hashing algorithm. This makes these platforms one of the safest places to keep digital assets.
Nonetheless, these are the most basic types of issues that you might face when you’re dealing with digital currency. Other risks also arise from owning a crypto savings account, which is related to the nature of these accounts.
One such risk is that a customer could choose to default on their loan payment. This means that they might decide not to pay back their owed cash.
This would have been a problem if such platforms didn’t collect collateral from borrowers. Thankfully, most DeFi platforms provide overcollateralized loans. So, if lenders default on their payments, the collateral gets used to pay back investors.
As you can see, crypto savings accounts aren’t entirely safe. However, they offer lower risk factors compared to other crypto-earning opportunities.
Compound interest applies in some crypto savings accounts when earning interest with cryptocurrency. In traditional banking, customers earn simple and compound interest from a savings account.
The simple interest is the funds they earn from their principal investment. You earn compound interest from the principal investment and the older interest. This means compound interest is an interest applied to the simple interest you earned from a savings account.
As such, compound interest is only logical to be larger than simple interest. Compound interest also grows the value of a savings account much faster than simple interest.
A crypto savings account follows the same format, where compound interest applies to simple interest. However, some services offer it as a separate feature. If you want to earn compound interest besides simple interest, ensure that your crypto savings account offers that service.
Due to the way that compound interest works, crypto savings accounts add this interest to accounts at specific intervals. A rule of thumb is that investors earn more compound interest for shorter time intervals. That’s because the extra interest gets added as soon as you deposit your crypto assets in the savings account.
Nonetheless, the savings platform decides the time intervals for earning compound interest. Although many platforms offer compound interest every month, some offer it bi-weekly, daily, or weekly.
Daily or weekly compound interest isn’t much, though. The longer time intervals pay more. If you want to earn more, try monthly or quarterly compounding.
Trading cryptocurrency is the most popular method of increasing the value of crypto assets. Traders take advantage of the market price fluctuations to buy lower-priced digital coins and sell them much higher. Nevertheless, this method exposes your assets to many risks, as you also stand to lose them all.
Conversely, how to earn interest on crypto is a less risky method of increasing the value of your assets. It uses the principle of HODL to speculate the future value of that coin while earning interest on it.
However, trading crypto increases the value of your assets much faster than earning interest does. So, if you can afford to wait, you should consider earning interest in a crypto savings account.
Earning interest on crypto isn’t the same as crypto staking; however, they share some similarities. That’s because they involve investors depositing their funds in a crypto savings account and leaving them to accumulate interest.
However, that’s where their similarities end. When you’re just earning interest on a cryptocurrency account, you can always use your fund whenever you feel like it. Of course, this depends on the platform, as some might not allow you to easily access the saved funds.
On the other hand, crypto staking requires you to lock up your crypto assets for some time. This means depositing your digital currency into the account will stipulate a lock-up period. During the lock-up period, you’ll be unable to access those coins.
Once the lock-up period is over, your assets will be accessible once more. The lock-up period directly correlates with the amount of earned interest. Accordingly, locking up your funds for a longer period enables you to earn more.
Although both methods require you to deposit funds, crypto staking leaves your locked-up funds to the discretion of that platform. Your funds would act as a node to help validate user transactions on that blockchain.
The most glaring difference between crypto staking and earning interest is that you cannot stake all digital coins. Just like the name suggests (crypto ‘staking’), only blockchains that run on the proof of stake algorithm can be staked. This means you cannot use proof of work blockchains like Bitcoin for crypto staking.
You should also note that crypto staking requirements can be quite steep. The current requirement for staking Ethereum as of writing is 32 Ether. So, if you can’t provide that amount or higher, you can’t use crypto staking.
While a crypto interest account is a safe way to increase your cryptocurrency, it’s not without its downsides. So, you need to consider these pros and cons of how to earn interest on crypto before deciding which site to use.
This part of our guide on how to earn interest on crypto will help you understand what these are so you can make an informed decision.
Compared to traditional savings accounts, you’re bound to earn more with crypto savings accounts. Most crypto-saving platforms pay 5% and 10% interest, with many more going higher than that. This is more than you can earn in high-interest savings accounts.
Crypto savings accounts usually come with no or short minimum lockup period, meaning you can withdraw your money whenever you like. This is an excellent benefit if you plan on spending your earnings quickly, giving you total control over your investments.
Earning interest exposes your saved coins to fewer risks than trading your cryptocurrency. This is the perfect option for individuals that don’t understand how to read the market. It’s also suitable for newbies in the crypto space.
Although digital currency enjoys reasonable hacker-proof security from the blockchain, a weak spot in such security lies with the wallet keys. If you forget your keys or lose the phone which contains your keys, you’ve lost ownership of your funds. That’s because most cryptocurrency platforms do not provide any methods for recovering lost wallet keys.
On the other hand, crypto banks and crypto savings accounts come with recovery features. So if you lose your access details, you can recover them somehow.
Although rare, some crypto interest accounts come with a minimum deposit amount. This means that if you don’t possess that amount of digital currency, you wouldn’t be able to deposit your funds.
You can see that this is at odds with regular crypto trading, where you can trade any amount at all. Nevertheless, this is a feature you have to come to terms with if you want to earn interest on crypto.
Some savings platforms lend your crypto keys out to customers who borrow funds. This means that those funds are out of your hands for that period. Hence, they can only be used when the borrower pays back.
This is unacceptable for many investors, as they wouldn’t want to leave their keys at the mercy of someone else. As such, most of them avoid crypto savings accounts for their investment opportunities.
You shouldn’t delude yourself that depositing your digital coins absolves you from the fluctuations of digital currency. The price fluctuations of cryptocurrency also affect the value of your stored coins.
Hence, if you’re storing any cryptocurrency, you have equal chances of gaining or losing coins. In the end, it’s all an investment, just like cryptocurrency trading, that’s full of unknown risks.
So, if you’re going to be storing your Ethereum, or other cryptocurrencies, you’ll need to do lots of analysis. You’ll need to be able to speculate on the future state of the market, or you’ll lose your funds.
Traditional banks offer Canada Deposit Insurance Corporation (CDIC) deposit insurance. This protects your funds should they get lost in some way, like a hack attack. On the other hand, crypto savings accounts are not protected by any federal insurance.
Unlike traditional savings accounts, where you can withdraw at leisure, some crypto savings accounts have restrictions. Hence, the platform could limit the amount a customer can withdraw during a particular period.
Even though how to earn interest on crypto is quite a novel idea, there’s no denying it’s still new. Since it isn’t as well-regulated as the older crypto trading systems, you should expect some hijinks while using this service.
There aren’t that many cryptocurrency platforms offering this service, which limits people’s options. Nevertheless, crypto interest accounts are still growing, so you can expect more platforms to offer this service in the future.
Time to wrap up how to earn interest on crypto. Knowing how to earn interest on crypto is a good way to put extra cash into your pocket. You can earn anywhere between 0.1% to 25% per year depending on the platform you use.
Some platforms offering competitive rates include Binance, Coinbase, Gemini, and Nexo. You can open a crypto savings account at any of them and start saving your crypto to earn interest. Thanks for checking out how to earn interest on crypto.
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Some crypto savings accounts allow you to earn crypto on almost any coin. However, most platforms focus on popular cryptocurrencies like Cardano, Bitcoin, and Ethereum. It's hard to see savings platforms for upcoming and lesser-known cryptocurrencies.
Stablecoins offer the safest way to earn interest on crypto because their prices don't fluctuate. However, they don't pay much interest compared to altcoins. But Gemini offers fair interest rates on both stablecoins.
Altcoins tend to pay higher returns than stablecoins because they're generally more liquid. They also tend to be volatile, which means that the price may fluctuate significantly. Platforms like Binance pay up to 25% APY on altcoin deposits. You can find up to 100% APY other platforms, but they tend to be riskier.
It all comes down to what you’re comfortable losing. As a precaution, only invest 10% of your entire portfolio. Most crypto savings accounts don't have minimum investment amounts. So, it's always recommended to start small and build from there.
Crypto interests work like any other type of interest. You earn a percentage every year on your deposited amount. If you deposit CAD 100,000 worth of Bitcoin (BTC) and invest it for one year, you can get back CAD 1,000. The amount depends on the interest rate and market demand for collateralized loans.
Although earning interest is a benefit of owning a crypto savings account, it’s not a free service. Canadians would encounter fees when withdrawing funds or depositing them. High-interest savings accounts are known for charging fees. Check your provider’s terms of service to see if they charge hidden fees.
The Canadian government is one of the few jurisdictions that tax cryptocurrency trading and the profits you accrue. The Canadian government sees cryptocurrency as commodities for tax purposes. As such, the citizens must pay tax on earnings from these commodities. Hence, depending on the jurisdiction, they could still impose taxes on crypto interest accounts.
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