With cryptocurrency’s popularity on the rise, many investors are looking for ways to get in on the action themselves. However, cryptocurrency’s volatility makes some individuals wary about trading and investing in it. Despite that, there are other options to earn interest on cryptocurrency assets for those willing to take the risk.
Opening a crypto savings account is one way of doing so. It works in a very similar manner to traditional interest-bearing savings accounts. However, the returns can be much higher.
How Exactly Does A Crypto Savings Account Work?
An investor will need to transfer some of your cryptocurrency assets to the savings account provided by the crypto company. The account provider will then invest it to generate interest. They may lend the assets out to borrowers or use their own capital to trade with. They’ll pay the interest on what’s left over to the investors.
Opening a crypto savings account will allow investors to diversify their crypto assets and provide a form of protection against any sharp drops in the market. The drawback to this method is that your money is locked up for some time.
Below is a step-by-step guide on how to open and earn interest from a crypto savings account.
- Sign Up
First things first: you’ll need to open up an account with a savings account provider. Such providers are often online-based, so doing so is as easy as completing any other type of application.
Be sure to thoroughly read the provider’s terms of use before signing up to avoid any potential issues down the road. Ensure that the crypto you wish to deposit into that account is in your possession. You can’t deposit cryptocurrency you don’t own and expect to start earning interest on it.
- Choose Your Crypto Asset
Next, you’ll need to decide what kind of cryptocurrency asset you’d like to store and earn interest on. Each provider might offer different types of crypto to choose from. For instance, some providers would allow you to store several different altcoins (all cryptocurrencies other than Bitcoin) such as TRON and Nano. In contrast, others might only offer stable coins with high market capitalization like Bitcoin.
- Decide On Your Deposit Amount And How Much Interest You Want To Earn
Once you’ve chosen which cryptocurrency asset you’d like to store, decide on the amount you’d like to deposit. Crypto savings accounts don’t usually have limitations on this. However, some might have minimum deposit requirements. For example, an account might allow you to deposit as much as you want and offer an interest rate of 5% per year on that deposit but only if you deposit at least one thousand dollars’ worth of crypto.
Different providers offer different interest rates for the same kind of cryptocurrency asset. That’s why it’s important to compare those rates and pick out one that suits your requirements and budget.
Some crypto account providers also offer what’s called a compound interest rate. The interest accrued on an account is earned and added to the total account balance. The additional interest earned then accrues interest, which is added on top of the combined total of current and previous interest rates. At the end of each year, this amount is paid out to or compounded into your account.
- Deposit Crypto
Now that you’ve chosen your crypto asset, selected an amount to deposit, and picked the annual interest rate you’d like to earn on that investment, you’re ready to deposit crypto. Since each provider has its own process for doing so, you’ll need to read through the provider’s terms of use or educate yourself on how cryptocurrencies work before attempting to send crypto to your savings account.
Once you’ve deposited your cryptocurrency and the crypto account provider has verified it, your crypto savings account is now active. You’ll be able to check your balance and see how much interest you’re earning by accessing the provider’s website or mobile app.
Is A Crypto Savings Account Risky?
As with any investment, crypto savings accounts have their risks. If you’re depositing a volatile cryptocurrency into your savings account, you might not be able to make your account as stable as you’d like it.
Because cryptocurrency still has limited regulations and uses, no one knows what the future holds for it. If you’re comfortable with that risk and plan on keeping your crypto invested for longer periods, then a crypto savings account is worth considering.
Final Words
With a crypto savings account, you’ll be able to store your cryptocurrency and earn interest off of it. These accounts have become more popular since the interest they offer is much higher than that offered by traditional savings accounts or investments.
However, there are certain risks involved depending on the type of cryptocurrency you’ll be using. By choosing a reputable crypto account provider and doing your research before investing, you’ll be able to maximize the benefits of this type of savings account.
