Crypto Interest Accounts

When it comes to cryptocurrency, most people choose to store them in an offline wallet or decide to leave it on the exchange.

However, another option for storing your crypto is in a crypto interest account. Crypto interest accounts offer a great opportunity to create a source of passive income and can help make your crypto work more for you.

The name speaks for itself. These are accounts where you can store your crypto and earn interest on them just for having them in the account.

These accounts work just like a bank. When you deposit money in banks, those banks then lend out your money and they collect interest on those loans. From the interest they collect, they then give a portion to you and keep the rest for themselves.

Crypto Interest AccountsThe same principle goes for these crypto interest accounts and some examples of companies that offer these accounts are BlockFi, Crypto.com, Nexo, and Celsius.

What sets these accounts apart from normal bank accounts though is that the interest offered is significantly higher than that of banks and the interest is paid in the cryptocurrency that you deposit.

For example, according to the Federal Deposit Insurance Corp (FDIC), they reported that the national average interest rate for savings accounts in 2020 was 0.05%.

Whereas with a crypto interest wallet, depending on which account you decide to go with, you can get interest rates of 5% and up which could help your account compound.

For some people, however, they are hesitant about investing in crypto in general, let alone being paid interest in crypto. They can still take advantage of these accounts though as they not only offer high interest on crypto but on stablecoins as well.

Crypto Interest Accounts

For example, Nexo offers a starting interest of 8% on stablecoins like USDC. As stated in the name, stablecoins are coins whose value is fixed. In the case of USDC, it is equivalent to 1 USD.

So, for those who stress about the volatility of their crypto assets and are hesitant about the crypto interest accounts, this is a great way to get a significantly higher return on your money.

Finding something with an 8% ROI that you can set and forget is not easy to find so this is very appealing.

Another useful feature of crypto interest accounts is the ability to take out crypto-backed loans. For instance, if you ever find yourself in financial difficulty and are tempted to sell your crypto, you can instead use the crypto in your account as collateral to take out a loan.

This is a great alternative as selling your crypto would trigger a taxable event and you could potentially miss out on capital appreciation. The interest rate and loan amount depend on what company you decide to go with.

However, although there are a lot of pros to using a crypto interest account, there are some downsides that are important to be aware of.

Firstly, as stated before, these accounts are able to pay you such high-interest amounts because the companies lend out your crypto to others. So, when you deposit your crypto into an account, they will have access to your crypto.

This is very different from an offline wallet where you manage your crypto investments yourself as you are trusting a company to take care of your investments.

In addition, crypto interest accounts are not FDIC insured so if the company you open an account with goes under, there is no guarantee that you will get your investments back.

Lastly, for some companies like crypto.com, to get the highest interest rate available you would need to stake your crypto. Staking means that you are locking an amount of crypto for a predetermined amount of time in the account and you won’t be able to do anything with it until the staking period is over.

This isn’t a big deal to those who buy and hold but for those who want to have quick access to their crypto, they would be better off using flexible plans that offer slightly lower interest rates.

Overall, crypto interest accounts have great potential. There are many pros to these accounts but there are some cons that may be deal-breakers to others. This is very much a high risk/high reward scenario so it’s important to not let the high-interest rates lure you in without fully understanding the risks involved.