If you’re invested in Bitcoin, Ether, or any of the other altcoins currently available, it’s essential that you know how to earn interest on crypto. Why? Because, while you’re waiting for the price of crypto to go up, you can enjoy the benefits of passive income.
In this article, we discuss how to earn interest on cryptocurrency, the power of passive income and compound interest, tips for maximizing yield, and we will introduce you to ways you can earn interest on your crypto.
Hodl Or Earn Interest On Crypto?
Even though cryptocurrencies have only been around for a relatively short amount of time, they’re already subject to one of the oldest questions in the investment world: hodl (hold) or earn interest?
If you choose to hodl, you simply let your crypto sit while waiting for the price to go up or down (depending on your financial goals). At the most basic, this is akin to hiding $50,000 cash in your mattress while you wait for the value of the U.S. dollar to increase.
If, on the other hand, you choose to earn interest on crypto, you’re putting your investment to work building passive income — the kind that requires minimal labor to earn and maintain.
This process is similar to depositing the $50,000 cash we mentioned above into a savings account at your local bank, where it earns some percentage of interest every year. The same principles apply to the cryptocurrency market today.
Currently, though, relatively few “brick-and-mortar” banks accept digital currency of any kind. How, then, can you earn interest on crypto?
The answer is simple: partner with Vauld.
Vauld allows investors to earn interest on crypto without staking or locking up their digital currency for prolonged periods of time.
At Vauld, not only will you have access to some of the highest interest rates in the business, but you’ll also have access to crypto borrowing and trading features you won’t find anywhere else.
We also offer powerful application programming interface (API) integrations that give enterprises of all sizes and types the power to offer crypto services to their users.
Ultimately, the choice of whether to hodl or earn interest on crypto is entirely up to you. But, as cryptocurrency markets continue to stabilize — making rapid buying and selling less profitable — the benefits of moving your crypto to Vauld become increasingly apparent.
We’ll examine one of those benefits in the next section.
The Power Of Compound Interest
The reason it makes sense to earn interest on crypto instead of just hodling comes down to the power of compound interest (the addition of interest to the principal sum of a deposit so that the initial amount earns interest upon interest).
Compound interest is the result of reinvesting interest rather than paying it out so that interest in the next period is calculated based on the principal sum plus any interest earned before that.
To make that definition a bit clearer, let’s look at an example of compound interest in action.
Let’s say that you deposit one Bitcoin (valued at $50,000) in an account on Vauld where you can earn a whopping 4.60% - 6.70% APY compounded weekly. For the sake of this example, we’ll assume you leave your Bitcoin on deposit for one year (52 weeks).
Your first week of interest would total out at $44.23 ($50,000 x (0.046 / 52)).
Here’s where the real power of compound interest comes in.
You could opt to withdraw the interest you made and continue to earn passive income on the base $50,000 OR you could roll the interest into the base $50,000 and earn interest on the new, larger amount.
That would result in your interest for week two totaling out at $45.09 ($50,044.23 x (0.046 / 52)).
As you can see, the interest you earned during the second week increased by almost a dollar over the interest you earned in the first week. All because you rolled your profit back into the principal and relied on the power of compound interest.
If you continued to roll your profit back into the original $50,000 for an entire year, you would earn interest on crypto totaling $2,300. That’s a pretty good rate of return for just letting your Bitcoin or other altcoin sit in one place.
So how can you go about enjoying this kind of profit on your cryptocurrency holdings? Read on to find out.
How To Earn Interest On Crypto
1) Compare Interest Rates
Not all crypto banking systems are created equal when it comes to the annual percentage yield (APY) they offer. Before you commit, compare interest rates across different platforms and choose the one that’s right for you.
Vauld, for example, offers 4.6% - 6.7% APY on Bitcoin and upwards of 12.68% APY on other tokens.
2) Choose A Crypto Account That Accepts Your Tokens
As you shop for a place to earn interest on crypto, be sure to pay attention to the tokens they accept. If you’re holding Bitcoin, you don’t want to sign up for an account that only accepts Ether.
Most crypto banks support a variety of currencies, but some support more than others.
Vauld, for example, accepts over 30 different cryptos so you can maximize your coverage, diversify into different areas, and get the most return on your investment.
3) Check The Minimum And Maximum Deposit Limits
Some crypto banks set limits on the minimum and maximum amount of cryptocurrency you can deposit.
Vauld, on the other hand, does not set a limit on what you can deposit. For those just getting started, Vauld accepts transactions as small as one dollar’s worth of crypto. For those with more crypto in their portfolio, Vauld accepts large deposits of any size, without limit.
4) Factor In Deposit Fees
Most crypto banks charge a deposit fee every time you put crypto in your account. That cuts into the total interest you earn and can be a major speed bump toward achieving real profits.
We know that charging deposit fees is like pulling the rug out from underneath someone before they even get on their feet. You’ll never have to “pay to play” when you earn interest on crypto with Vauld.
5) Avoid Staking And Minimum Lock Up Times
Something else to watch for: staking and minimum lock up times. Some crypto banks may require you to leave your crypto on deposit for a certain amount of time (e.g., one month, six months, 12 months) before they’ll start paying interest.
Not Vauld. We understand that flexibility and accessibility are the heart and soul of the crypto market and that you want to be able to borrow and trade off your digital currency at all times. That’s why Vauld doesn’t make you agree to leave your crypto in place, demand a Proof of Stake or a Proof of Work, or set minimum lock up times before you can start accruing interest.
Of course, you’ll earn more interest the longer you leave your crypto on deposit, but we give you the freedom and flexibility to deposit and withdraw at any time.
6) Prioritize Security
When shopping for a crypto bank, always prioritize security. Less secure sites put your investment at risk and all but negate any benefits you could gain from higher interest rates.
Vauld, for example, offers multiple layers of security, including our new Safelisting option, which automatically limits token withdrawals to addresses that you manually designate as safe.
This prevents a third-party attacker from being able to withdraw your funds to an external address or account that you did not previously authorize.
7) Go Where The VCs Are
One surefire way to maximize your crypto profits is to go where the venture capital (VC) is. When you do, you know you’re getting involved with a solid company built on a firm financial base.
Vauld recently raised $25 million in Series A funding led by Valar Ventures — a VC firm founded by Andrew McCormack, Peter Thiel, and James Fitzgerald — and including other notable investors such as Pantera Capital, Coinbase Ventures, CMT Digital, and Cadenza Capital.
Earn Interest On Crypto With Vauld
- And many more…
We calculate interest daily and distribute these profits to your account every week, where you can withdraw any amount at any time (while you continue to earn interest on the balance).
Want to earn even higher interest rates? Opt for a fixed deposit of at least one month and earn up to 3% more per year over our basic savings rate.
Vauld even lets you borrow against the value of your tokens and trade your crypto with ease.
In addition to facilitating your core crypto needs (owning, lending, borrowing, trading, and spending), we adhere to strong values.
As a Vauld customer, you’ll enjoy:
- Our customer-first attitude
- Extremely competitive rates
- Seamless product experience
- Transparent business practices
- Continuous upgrades
- Adaptability to customer needs
Don’t let your crypto just sit there. Start building wealth right now. Visit Vauld.com to learn more and see how you can earn interest on crypto from the very first deposit.