do you want to go directly to the answer? hodlnaut is now offering up to 13.86% apy on eight cryptocurrencies namely btc, wbtc, eth, dai, usdc, usdt, ust and luna. They have also revised their interest rates. you can check here for more information.
With inflation rates topping 7% in 2022, investors are looking for ways to beat inflation with their investments. Decades ago, investors turned to gold as a safe haven to store value in times of inflation. now, however, more people are turning to bitcoin to store value in a scarce asset that is accepted globally. While holding bitcoin can be a good investment strategy on its own, there are ways to grow your portfolio faster than simply holding digital assets. the easiest way is to earn interest on bitcoin, which you can do on various investment platforms today.
Reading: Earn interest on bitcoin
learn how you can start earning interest on bitcoin now.
step 1: open a crypto account.
The most common way to earn interest on bitcoins is through a savings account with a cryptocurrency lending platform. These platforms lend bitcoin to institutional and retail investors and have investors collateralize their loans with cryptocurrencies in the event of a default.
Some popular crypto accounts that allow you to earn interest on bitcoin are blockfi and nexo.io. nexo.io offers the highest interest rate at 8% per year.
In addition, nexo currently has a promotion that gives new users free cryptocurrency for signing up. The bonuses in the promotion increase with the amount one deposits, starting with a $10 bonus for new users. users who deposit $100 and over $100 in free crypto for users who deposit $1,000 or more on the platform.
Alternatively, you can use bitcoin on the ethereum blockchain: wrapped bitcoin (wbtc). You can earn interest on wrapped Bitcoin using many services on the Ethereum blockchain, and you don’t even need to create an account to get started. Once you connect your ethereum wallet to a decentralized platform like composite or aave, you can start earning interest on your wrapped bitcoin.
For beginners, crypto lending platforms are the easiest way to earn interest on your crypto. all you need to do is sign up for an account, and once you’ve funded your account, you can start earning interest. Most of these accounts do not have minimum lock times, so you can withdraw your bitcoin at any time. A centralized exchange like hodlnaut makes it easy for beginners to start earning interest on their bitcoin.
Step 2: Compare interest rates.
Depending on the platform you use, the interest rate you will receive on your bitcoin savings account will vary. Most platforms allow you to earn between 3% and 8% APR on Bitcoin, but some platforms like BlockFi have tiered interest rates depending on how much Bitcoin you deposit.
For example, you’ll earn 6% interest on up to 2.5 bitcoins, but you’ll only earn 3% interest on a deposit of more than 2.5 bitcoins. There is no minimum amount to start earning interest on your bitcoin, and you can deposit as much as you want to your blockfi account.
Most of these interest rates are floating rates, meaning they change with market supply and demand. Most interest rates don’t fluctuate much, but there can be fluctuations in rates from time to time. it’s a good idea to monitor the interest you’re earning to make sure you’re earning the highest interest rate possible.
step 3: add bitcoin to your wallet.
Some crypto lending platforms like blockfi allow you to buy crypto directly via wire transfer from your bank. To do this, you will need to add your bank account number and routing number to your account. once you’ve added your banking information, you can buy bitcoins and start earning interest.
Other platforms, such as nexo.io, only allow you to deposit crypto on their platform. If you don’t already own bitcoin, you’ll need to create an account with a cryptocurrency exchange.
Some easy to use exchanges where you can buy bitcoins with a bank account are etoro and coinbase. these exchanges have mobile apps that make it easy to manage your crypto on the go.
if you choose to earn interest on wrapped bitcoin, you can buy wbtc on coinbase and send it to your preferred ethereum wallet. good software wallets to use with ethereum are coinbase wallet and metamask as they are easy to use with decentralized applications.
once your wbtc is deposited into your ethereum wallet, all you need to do is connect your wallet to a program like compound or aave to start earning interest on your wrapped bitcoin.
step 4: earn interest.
Once you’ve deposited your funds into an interest-bearing account, you should begin earning interest immediately. Depending on the amount of bitcoin you deposit and the platform you use, the interest rate you receive from your savings account will vary.
Since interest rates range from 3% to around 10%, it’s a good idea to keep your funds in your savings account long-term if you want to earn a significant amount of interest on bitcoin.
how does compound interest work for bitcoin?
There are 2 main types of interest you can earn on a savings account: simple interest and compound interest. Simple interest only earns interest on your principal investment, while compound interest earns interest on your principal investment plus interest previously earned. Because of this, compound interest grows your account at a faster rate than simple interest.
Compound interest is added to your account at certain intervals specified by the savings account in which you invest. the shorter the time interval, the more you will earn with compound interest. This is because you will start earning additional interest on top of previously earned interest as soon as it is deposited into your savings account.
blockfi offers compound interest that is deposited into your account monthly. other platforms offer even shorter intervals for compound interest; nexo.io offers daily compound interest.
While shorter time intervals will grow your portfolio faster, there isn’t a huge difference in earning potential between compounding interest deposited weekly and compounding daily. the intervals for compound interest are much more important when the interval is quarterly or monthly, since the interest you earn in this time will be much higher than the daily or weekly interest you earn.
pros and cons of earning interest on bitcoin
An important benefit of earning interest on bitcoin is the high interest rates you can receive. While most traditional savings accounts offer less than 1% annual interest, most bitcoin savings accounts offer interest rates at least 5 times higher than traditional savings accounts. and the interest is paid in bitcoin, so if the value of bitcoin appreciates, so will the interest you’ve earned.
The biggest risk of using bitcoin as a means of earning interest is the volatility of the price of the cryptocurrency. While you can earn 6% interest on your bitcoin, if the price of bitcoin drops just 6%, the USD value of your account will be worth the same after a year of investment. If you believe that the price of bitcoin will rise in the long run, then an interest bearing bitcoin account may be a good investment for you.
trading bitcoins vs. earning interest
As a bitcoin investor, you will need to know if you are going to trade or hold your bitcoin. Trading your bitcoin is another way to accumulate more cryptocurrencies, but you risk losing your investment in the market.
Since cryptocurrency prices remain volatile, trading cryptocurrencies is a high-risk strategy. instead, many investors who believe in bitcoin simply hold their crypto to speculate on its value. If you plan to hold your bitcoin for the long term, earning interest is a great, low-risk way to increase your bitcoin position.
frequently asked questions
explore more: the best crypto savings accounts to earn interest