You can earn interest on crypto through various methods, including staking, yield farming, lending, savings accounts, crypto credit cards and affiliate programs.
Earning interest on cryptocurrency is a smart way to make your money work harder for you. Whether you are a seasoned crypto trader or a newcomer to the space, knowing how to earn interest on your holdings can help you generate passive income and increase your overall investment returns. Imagine Bitcoin or Ethereum passively generating returns for you while you sleep. Intrigued? This guide unlocks the secrets to harnessing the power of crypto interest and propels you toward a future of financial innovation. Dive in and discover the different ways on how to turn crypto into an income-generating machine.
How to Earn Interest on Crypto: 6 Best Ways
When it comes to earning interest in cryptocurrency, various methods are available, each with its own set of benefits and considerations.
Here are some of the best ways to earn interest on cryptocurrency:
1. Crypto Staking
Crypto staking involves holding cryptocurrencies in a digital wallet to support the operation of a blockchain network. In return, users receive rewards in the form of additional cryptocurrency. Staking is a popular way to earn passive income on crypto assets, especially on proof-of-stake (PoS) networks like Ethereum, Cardano and Tezos.
2. Yield Farming
Yield farming, also known as liquidity mining, is the practice of moving cryptocurrencies between decentralized finance (DeFi) protocols to earn rewards. Investors can add their crypto assets to liquidity pools and earn interest or platform-specific tokens as a reward for providing liquidity.
3. Crypto Lending
Crypto lending platforms allow users to lend their cryptocurrencies to borrowers and earn interest on their holdings. Platforms like Celsius, BlockFi and Nexo offer interest-bearing accounts where users can deposit their crypto and earn annual percentage yields (APYs) on their deposits.
4. Crypto Savings Accounts
Similar to crypto lending, crypto savings accounts offer users the ability to earn interest on their cryptocurrency holdings. These accounts are typically offered by centralized exchanges or crypto-focused financial institutions, providing a way to generate passive income on crypto assets.
5. Crypto Credit Cards
Some crypto credit cards offer rewards in the form of cryptocurrency, such as Bitcoin or Ethereum, instead of traditional cash back or points. Users can earn a percentage of their purchases back in crypto, providing a way to earn interest on their spending.
6. Affiliate Programs
Crypto platforms often offer affiliate programs that allow users to earn rewards, such as platform tokens or a percentage of trading fees, for referring new users to the platform. This can be a way to generate passive income from your crypto-related activities.
Crypto Interest Rates vs. Traditional Banks
When comparing interest rates earned on cryptocurrency with those offered by traditional banks, there are significant differences to consider. Here's an overview of how they compare to each other.
| Feature | Crypto Interest Rates | Traditional Bank Interest Rates |
| Potential Returns | Higher | Lower |
| Volatility | High | Low |
| Security | Varies (Depends on platform) | High (Regulated and insured) |
| Flexibility | Often flexible staking options | Limited withdrawal options |
| Tax Implications | Generally taxable | May be tax-exempt (depending on amount and type) |
Choosing between crypto interest rates and traditional bank rates depends on individual preferences, risk tolerance, and investment goals, considering factors like fees, volatility, and growth potential.
- Crypto interest rates can potentially offer higher returns exceeding 10% APY, but come with the risks of volatility, security breaches, and taxation.
- Traditional bank interest rates may be low but provide security, stability, and familiarity for investors.
Where to Earn Interest on Crypto
- Best For:long-term cryptocurrency investorsVIEW PROS & CONS:securely through Nexo's website
When it comes to earning interest on cryptocurrency holdings, various platforms are available, each offering different options for users.
Centralized Cryptocurrency Interest Options
Coinbase
Coinbase offers staking rewards of up to 17.66% APY on supported cryptocurrencies like Ethereum, Tezos and Cosmos. This platform provides a user-friendly interface and secure storage solutions, making it accessible to a wide range of investors.
Nexo
Nexo allows users to earn up to 30% APY on their crypto deposits with a diverse range of supported assets. The platform offers features like instant withdrawals and flexible loan options, catering to the needs of investors and borrowers.
Crypto.com
The Crypto.com platform offers interest rates of up to 12% APY on various cryptocurrencies, with weekly payouts. With its mobile app and range of financial services, Crypto.com provides a comprehensive solution for earning interest and managing crypto assets on the go.
YouHodler
YouHodler provides interest rates of up to 15% APY on supported assets like Bitcoin, Ethereum and Litecoin. However, the platform is not available to U.S. residents. Despite this limitation, YouHodler offers competitive rates and a user-friendly interface for international users.
Decentralized Cryptocurrency Interest Options
Stader
Stader is a decentralized platform that offers staking rewards of up to 8.84% APY on cryptocurrencies like Ethereum and Solana. By leveraging decentralized networks, Stader provides users with greater control over their assets and participation in the governance of the platform.
DeFi Protocols
Decentralized finance (DeFi) protocols, such as Aave and Compound, allow users to lend cryptocurrencies and earn interest through yield farming and liquidity mining. The interest rates can be highly variable, depending on market conditions, but DeFi protocols offer users the opportunity to engage in permissionless financial activities without intermediaries.
Staking Pools
Platforms like Lido and Rocketpool offer decentralized staking services, allowing users to earn rewards by staking Ethereum without the need to run a validator node. These staking pools aggregate funds from multiple users to participate in blockchain consensus, offering a hassle-free way to earn staking rewards.
Pros and Cons of Earning Interest on Cryptocurrency
Here are the pros and cons of earning interest on crypto.
Advantages
Passive Income Generation
Investors can earn passive income from their cryptocurrency by earning interest without the need to trade or sell their assets. By holding their cryptocurrencies in accounts or platforms that offer interest, they can accumulate additional coins or tokens over time.
Compounding Growth
Earning interest on cryptocurrency, similar to traditional savings accounts, can take advantage of compound interest. This allows the interest earned to be reinvested, which can result in increased interest over time and potentially lead to significant growth of the investment.
Diversification of Income Streams
Investors can diversify their income by earning interest on their cryptocurrency holdings. This can be particularly helpful for those who already invest in stocks or real estate, as it helps them balance their portfolio with income from crypto.
Access to Innovative Financial Products
Several cryptocurrency platforms provide distinct financial products like lending, staking, or yield farming, which can yield better interest rates compared to traditional banks. This creates new opportunities for investors to enhance their assets in ways that might not be possible with conventional financial systems.
Inflation Hedge
In an environment where fiat currencies can face inflation, earning interest on cryptocurrencies can provide a safeguard. The returns from crypto interest may help counteract inflation's impact on purchasing power, maintaining and possibly increasing the value of the original investment.
Disadvantages
Market Volatility
Cryptocurrencies are characterized by high price volatility, meaning the value of the cryptocurrency you earn interest on can change significantly, which might result in substantial losses that could surpass the interest earnings.
Regulatory Concerns
The rules surrounding cryptocurrencies are still changing, and alterations to these regulations can affect the treatment of interest on crypto assets. This ongoing uncertainty may present legal and tax risks for investors.
Security Risks
Keeping cryptocurrencies in wallets or services that provide interest can potentially make your assets vulnerable to hacking and cyberattacks. Certain platforms may lack adequate security measures, which could jeopardize your funds.
Lack of Insured Deposits
Cryptocurrencies stored on interest-earning platforms typically do not have the same government insurance protections as traditional bank accounts, such as those provided by the FDIC in the U.S. If the platform encounters financial difficulties or is compromised by a hack, there is a risk of losing your investment without any means of recovery.
Compounding Risks
Certain platforms provide compounded interest on cryptocurrencies, which can be appealing but may also lead to excessive market exposure. Continuously compounding your earnings could result to a substantial holding of a volatile asset, thereby significantly raising your risk profile.
How Much Interest Can You Earn on Cryptocurrency?
The amount of interest you can earn on cryptocurrency varies significantly but is generally much higher than the interest rates offered by traditional savings accounts or government bonds. Crypto investors can earn interest rates ranging from around 5% to as high as 14.5% APY on their cryptocurrency holdings. This is substantially higher than the interest rates typically offered by traditional financial instruments.
For example, the interest rates on crypto are often described as higher than the dividend yields of most U.S. stocks and much higher than the interest rates on U.S. Treasuries or high-yield savings accounts. Additionally, the interest earned on crypto can compound over time, further increasing the potential earnings for investors who reinvest their interest.
However, earning interest on crypto comes with unique risks, such as the lack of regulatory oversight, the volatility of the crypto market, fees and the potential for hacks or fraud on some crypto lending platforms.
Turn Crypto Into a Cash Cow
You can use various methods to earn interest on crypto, including crypto staking where users hold coins to support blockchain networks and receive rewards; yield farming, where you move coins between DeFi protocols for rewards; crypto lending, where users lend coins and earn interest; and crypto savings accounts, offered by exchanges or financial institutions. Some crypto credit cards offer crypto rewards, and affiliate programs provide rewards for referrals. Each method has pros and cons, such as higher yields and flexibility for centralized options, while decentralized options offer control but come with platform and market risks. Investors should research and choose based on their goals and risk tolerance.
Frequently Asked Questions
How to gain interest in crypto?
You can earn interest on crypto by using platforms that provide crypto savings accounts or staking services. These options let you generate interest on your investments over time. Additionally, engaging in yield farming or liquidity pools in decentralized finance (DeFi) may offer higher returns, but they come with different levels of risk.
Which crypto gives interest?
Users can earn interest on several cryptocurrencies, including Bitcoin, Ethereum, and stablecoins like USDC or DAI, by utilizing various crypto savings accounts or yield farming platforms. By depositing these assets into lending platforms or decentralized finance (DeFi) protocols, individuals can generate passive income from the interest accrued on their holdings.
What is the best cryptocurrency to earn interest?
The ideal cryptocurrency for earning interest usually relies on the interest rates available from different platforms. Common choices include Bitcoin and Ethereum, which can be found on lending platforms or through staking. It’s important to conduct research and understand the risks, as interest rates can change and returns may differ based on market conditions.
About Ishan Jain
Ishan Jain is a technical enthusiast with a knack for financial analytics and trading. Ishan primarily works on AI algorithms, business development, and software engineering for his ventures and side projects, and he produces Web3 content for Benzinga. Ishan has been involved in DeFi in a variety of ways, including heading a project at a crypto asset investment firm along with leading a blockchain security research project.