With interest rates from banks at record lows, more people are turning towards crypto to generate passive income. There are now a number of legit crypto savings accounts available to Australians that will pay you interest on your deposits.
Here is my guide on how to earning interest on crypto:
Earn Interest on Your Bitcoin
You can now earn interest on your Bitcoin with a Bitcoin savings account. Here are the latest interest rates for Bitcoin from the top platforms.
The Best Platforms to Earn Interest on Crypto
I’ve tested out each of these platforms (and many more) to find the ones that offer the best rates and best security.
These are the platforms I consider to be the best for earning interest on crypto:
BlockFi – My Top Pick
BlockFi is one of the largest crypto lending and borrowing platforms having originated over $20 billion in loans. They offer excellent interest rates and are one of the few platforms I trust. They are located in the United States.
I like to use BlockFi over other platforms as they don’t require you to stake any coins. Platforms like Crypto.com require you to purchase and stake their native CRO coin. BlockFi is more like a traditional bank.
Why BlockFi is my Top Pick
- Great Design and Easy to Use – BlockFi is one of the nicest platforms to use. It’s professionally designed and even crypto beginners will be able to navigate it.
- Trusted and Secure – BlockFi has built a solid and trusted platform. I believe they follow all the “best-practice” procedures to minimise risks.
- Great Interest Rates – BlockFi offers some of the most competitive interest rates. Their rates are sustainable, meaning they will have a profitable lending business well into the future.
- No Native Token – You don’t need to buy a coin and stake it like on some platforms to earn the best interest rate. BlockFi doesn’t have their own token 🙂
Get $10 Free on BlockFi
If you sign up to BlockFi using a referral code, you’ll get a bonus $10! Just sign up using this link to claim your bonus.
Step by Step Guide: Earning Interest on Crypto
While crypto seem quite complex, these platforms for earning interest are all very simple to use. Here’s a step by step guide on how to get started:
- Buy crypto – I recommend CoinSpot to most people. It’s the trusted exchange I use to buy Bitcoin and other alt coins. Remember that you’re going to have to send crypto to an exchange so be wary of transaction fees. A coin like Litecoin or DogeCoin will have a smaller transaction fee to send to your crypto savings account. Where as Bitcoin and Ethereum (currently) have higher transaction fees.
- Send the Crypto – Sign up to one of the interest bearing platforms above. Choose the one that has the best interest rate for your coin. You can generate an address from within each platform to deposit coins.
- That’s it! – Just like a bank account, you’ll get interest deposits at a set interval. It depends on the platform but it’s often weekly. And the best bit about these apps is that your earnings will compound.
Risks of Using These Apps
Crypto isn’t as straight forward as traditional financial markets. And it’s important to be aware of the risks. Blockfi has put up a great article that walks you through some of these risks.
- Lending Risks – These apps are all lending platforms. That means they lend out crypto to borrowers. There is a risk that people will default on payments that could negatively affect returns. The apps do require collateral which mitigates the risks, but doesn’t mean it’s risk free. Blockfi so far has lent over $20 Billion to date without incurring a credit loss.
- Hacking Risks – Crypto is liable to be hacked. And these platforms could be hacked. The apps can mitigate this risk by taking out insurance against hacking and using custodial services. If you’re storing a large amount of crypto I would recommend insuring against a loss (more on that below).
- Crypto Risks – Crypto faces a number of risks. It could become regulated, developers can abandon projects, coins can be forked. Crypto is volatile. So don’t treat money in a crypto savings account as life savings that you rely on. Treat it as a speculative investment.
Buying Insurance to Mitigate Risks
If you want to reduce the level of risk it’s now possible to take out cover. In the event the custodian (such as Nexo) gets hacked, you are covered and will get an insurance payout. Obviously this would reduce your overall returns, but might be worth it for large positions.
Earning Interest on Crypto with DeFi
The platforms above are centralised. Meaning they are controlled by one company or entity. But there are now platforms that let you earn interest on crypto that are completely decentralised. They are powered completely by the blockchain and can’t be easily shut down or censored.
The upside to using DeFi is that you can lend, stake and earn interest on crypto without giving up control of your funds. If the platform is hacked, in theory you will be fine. The downside to these platforms is they can be more complex to use.
I’ve played around with PancakeSwap and a few other platforms. While I love the concept, if you don’t know what you’re doing you can easily lose money. As they are built on the blockchain, every transaction requires a blockchain transaction. Which requires fees. So it can be very costly. I’ve found that the interest rates on these platforms tend to be quite low as well.
If you’re looking to get into DeFi and make money from staking or lending, then I would recommend checking out DefiPulse. It keeps track of the top projects.