Here's Everything You Need to Know About Interest-Earning Crypto Accounts – Yahoo Finance

Photo by DrawKit Illustrations on Unsplash
Cryptocurrency owners are not just bragging about outlandish returns — there’s also the yield. Today, many platforms help you earn high returns just by depositing your crypto assets.
The idea seems to be gaining quick ground: Deposits in decentralized finance (DeFi) applications grew from about $1 billion in June 2020 to just under $40 billion by late January 2021.
But questions loom: How does it work? How high is the interest rate? Are there any risks? Who is it ideal for?
This article covers all your questions and hopefully more so that you can get a solid understanding of interest-earning crypto accounts.
How a Cryptocurrency Interest-Earning Account Works
The premise of an interest-earning crypto account is the same as a regular savings account. You deposit your Bitcoin or altcoin and earn compound interest on your assets.
The only difference is that the rate of return is significantly higher compared to traditional savings account rates. You can also receive weekly payouts to your wallets and withdraw funds anytime.
Currently, the most you can earn from a savings account in the U.S. is 0.7% annual percentage yield (APY), offered by Sallie Mae's SmartyPig account — 11 times the FDIC’s national average of 0.06%.
Crypto interest-earning accounts offer interests up to 7.5% APY, on average. But some platforms can even allow you to earn interest up to 12.73% APY on your cryptocurrencies — no lock-up or deposit limits. The interest is driven by market effects and is paid out in cryptocurrency. You may need to pay a withdrawal fee, which is regularly adjusted according to blockchain conditions.
Your platform can offer you high interest because it lends your crypto assets to individuals, corporations or institutions that use it depending on their business functions. The borrowers return the assets with high interest, and your platform takes a small portion of the interest and passes the rest to you.
Is This Risky?
A high reward indeed comes with high risk. But in this case, the risk is directly proportional to the platform you choose to invest in.
In general, there are 2 main risks you should be wary about: hacks and borrower defaults.
Hackers can easily access platforms that have a weak safety infrastructure, no encryptions and store your tokens in a hot wallet. Additionally, companies that are not licensed with an operating permit may be prone to a breach.
As for borrower defaults, it heavily depends on who the platform chooses to trust. If a company is transparent about its lending standards and maintains a stringent requirement for its counterparties, that lowers the level of risk.
It’s advisable to look into what precautions a platform takes before you deposit your interest. For example, interest-earning crypto accounts like Hodlnaut employ Fireblock’s multiparty computation wallet infrastructure to secure funds.
It also offers an optional user custody protection, an alternative to traditional insurance. In the case of default, the company takes on the loss and pays its users from its equity funds. In such instances, the risk can be rather low.
Are Crypto Interest-Earning Accounts for You?
Cryptocurrency investments are a great way to diversify your portfolio. Although many think of it as a way to make money in the short term, its true potential will be seen when decentralized finance becomes more mainstream — a reality that is increasingly apparent every day.
For crypto owners who want to hold their assets for the long term, interest-earning accounts offer a sweet reward for patience.
But, before you deposit your crypto holdings into an interest-earning account, make sure you do your due diligence so that you can be at ease.
See more from Benzinga
Click here for options trades from Benzinga
You Can Earn up to 7.5% Interest on Bitcoin. Is it Worth the Risk?
This Company Could Lead the Next Innovation in Power
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Yahoo Finance tech reporter Dan Howley breaks down Jack Dorsey's latest comments on the Twitter board and the poison pill that the company is adopting in response to Elon Musk's takeover bid.
There’s plenty of talk around about the dreaded ‘R’ word, recession, as the markets are obviously cooling off following the prolonged bull runs of late 2020 and 2021. With inflation running at 40-year highs, and GDP growth slipping in Q1, it’s no wonder that people are talking about a return to the late ‘70s, and Carter-era economic malaise. But have we taken the pessimism too far? Covering the market situation for Wells Fargo, senior equity analyst Chris Harvey believes so. He sums up the forec
Shares of BioNTech (NASDAQ: BNTX) were sinking 8.2% as of 12:27 p.m. ET on Monday. Moderna (NASDAQ: MRNA) and Novavax (NASDAQ: NVAX) stocks were down 5.3% and 6.4%, respectively. There are different reasons behind each of these stocks sliding today.
Berkshire Hathaway's portfolio holds roughly four dozen securities, of which two well-known companies are screaming buys and another brand-name stock is a value trap.
Casa Systems gapped higher after word hit that Verizon was investing about $40 million in the company's common stock. But the technical picture gives some caution.
The stock market is having a rocky 2022 so far, with the benchmark S&P 500 index falling 7.8% year to date. Companies are turning to unconventional methods to buoy their share prices, and initiating a stock split seems to be the go-to move for some of them. Amazon (NASDAQ: AMZN), Tesla (NASDAQ: TSLA), Shopify (NYSE: SHOP), and Google parent company Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have all announced plans to split their stocks this year.
Business leaders are warning China's lockdowns could decimate economic activity for months to come.
Mullen Automotive Inc (NASDAQ: MULN) plans to start Electric Vehicle battery pack production in its research & development facility in California. The company is redeveloping the facility to make room for EV battery packs production. The battery packs will be used in Mullen's EV vehicle lineup, including the ONE EV Cargo Van, FIVE EV Crossover, and DragonFLY EV Sportscar programs. The initiative is an attempt to reduce dependency on third-party suppliers and reduce the risk associated with mater
“Are you allowed to say this?” one user tweeted. “No,” Dorsey replied.
Yahoo Finance Live anchors discuss first quarter earnings for Bank of America.
‘You're required to take tables no matter the size of the party. A party can be 4 to 25 persons.’
Investors in the electric vehicle (EV) sector have closely followed Rivian Automotive (NASDAQ: RIVN) since its initial public offering (IPO) last fall. Now, while Rivian is working to ramp up production, it is facing supply chain shortages that forced management to reduce its estimate for 2022 vehicle production. Shares plunged again today after The Wall Street Journal reported more dire warnings, from Rivian CEO RJ Scaringe, related to the supply chain.
Morgan Stanley's Benjamin Swinburne is downgrading shares of SiriusXM Radio (NASDAQ: SIRI) this week. Satellite radio is a product that's primarily used in the car, and you're not as likely to pay up for premium dashboard audio if there are incentives to avoid driving.
What happened Shares of AMC Entertainment (NYSE: AMC) are falling again in midday trading Monday with shares of the movie theater chain down 5.4% at 12:27 p.m. ET. The downturn comes despite CEO Adam …
Cruise ships have an endless array of food and beverage choices. Passengers on a ship from Royal Caribbean , Carnival Cruise Lines , or Norwegian Cruise Lines could literally eat their way around the world without leaving the buffet. On the newer ships like Royal Caribbean's Wonder of the Seas (the world's largest cruise ship) the choices are truly overwhelming.
The carmaker wants to produce 2 million electric vehicles a year from 2026. Here's an important piece of that puzzle.
In 2022, it would be foolish to deny that electric vehicles (EVs) are not the future of transportation. However, transitory periods open up new opportunities, in this case in developing and maintaining recharging networks. ChargePoint Holdings, Inc. (NYSE: CHPT) rose to prominence as a company that would tackle that problem. Yet, in the last 16 months, the stock has been on a steady decline.
Wedgewood Partners, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, the fund’s Composite (net) declined by -10.6%. The S&P 500 Index declined by -4.6%. The Russell 1000 Growth Index declined -by 9.0%, while the Russell 1000 Value Index […]
Many Americans are surprised to see they have not prepared as well as they had hoped for retirement when they finally get ready to call it quits. The bad news is, you’ll probably have to make some realistic assumptions of what your retirement will look like. If you’ve lived primarily paycheck to paycheck in your working years, that may continue to feel the case in your retirement.
Expect more drama even if the Twitter board rejects the Tesla CEO's offer for the social media platform. An Elvis Presley song has something to do with it.

source

Enable Exclusive OK No thanks