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2024-01-30 04:11:25In anticipation of inflation rates that are expected to exceed 7% in 2022, investors are searching for investing strategies that will allow them to outrun inflation. During the inflationary circumstances of the last several decades, investors looked to gold as a safe haven where they could keep their wealth. However, these days, an increasing number of individuals are looking to Bitcoin as a means of wealth storage in a limited asset that is recognized everywhere. Owning digital assets such as Bitcoin may be a solid investment strategy in and of itself, but there are other methods to increase your portfolio more quickly than holding digital assets. Earning interest on Bitcoin, which is possible on several different investing sites today, is the simplest method.
Discover how you can start earning interest on Bitcoin right now by reading this article.
Step 1: Open a crypto account
Having a savings account on a bitcoin lending platform is by far the most prevalent option for bitcoin holders to get interest on their holdings. Institutional and individual investors can borrow bitcoin from these platforms. However, investors must use the cryptocurrency they borrow as collateral in case they don't repay their loans.
BlockFi and Nexo.io are two well-known examples of popular cryptocurrency accounts that provide the opportunity to earn interest on Bitcoin holdings. Nexo.io has the highest annual percentage yield (APY) for its interest rate.
In addition, Nexo is currently running a campaign that rewards new users with free bitcoin just for registering an account with the platform. The amount of free cryptocurrency a user gets from the promotion depends on how much money they put into the site. Customers who put in $100 get a $10 bonus, and users who put in $1,000 or more get $100 free cryptocurrency.
You also have the option of using Bitcoin on Ethereum's blockchain, which is referred to as Wrapped Bitcoin (WBTC). You don't even need to establish an account to get started utilizing any of the various services available on the Ethereum blockchain to start earning interest on Wrapped Bitcoin. When you have successfully connected your Ethereum wallet to a decentralized platform such as Compound or Aave, you will be able to begin collecting interest on any bundled Bitcoin that you have.
New investors can look into cryptocurrency lending services to earn money on your bitcoin holdings in the simplest method possible. Signing up for an account is the only step required to begin accruing interest on your balance; all you need to do to get started is add some money. Because the majority of these accounts do not have minimum lockup durations, you are free to withdraw your Bitcoin whenever you choose. Hodlnaut is an example of a controlled exchange that makes it simple for new users to begin accruing interest on their Bitcoin holdings.
Step 2: Compare interest rates
Your Bitcoin savings account will earn a different amount of interest depending on the platform that you choose to use to manage it. On most sites, you may receive an annual interest rate on Bitcoin ranging from 3% to 8%. However, on certain platforms, like BlockFi, your interest rate is tiered and depends on the amount of Bitcoin you deposit.
For instance, you will get an interest rate of 6% on deposits up to 2.5 bitcoin, but you will only receive an interest rate of 3% on more than 2.5 bitcoin deposits. You don't have to put in a certain minimum amount to your BlockFi account before you can start getting interest on your bitcoin. You can put in any amount you want.
Most of these interest rates are considered floating rates, which means that they alter based on the supply and demand of the market. There may be little shifts in interest rates on occasion, even though most rates don't change by all that much regularly. It is smart to keep an eye on the interest you are accumulating to ensure that you are getting the best potential rate of return on your investment.
Step 3: Add Bitcoin to your portfolio
Some bitcoin lending sites such as BlockFi allow you to acquire cryptocurrencies straight from your bank via a wire transfer. In order to accomplish this goal, you will need to provide your financial institution's account number and routing number. Once you've given your bank information, you'll be able to buy bitcoin and start getting interest on your investment right away.
On some services, like Nexo.io, you are only permitted to deposit cryptocurrency onto the platform. You will need to register for an account with a cryptocurrency exchange if you do not already own bitcoin in your possession.
eToro and Coinbase are two examples of exchanges that are simple to use and allow users to purchase bitcoin using a bank account. The mobile applications provided by these exchanges make it simple to take care of your cryptocurrency holdings wherever you are.
If you want to participate in the Wrapped Bitcoin interest program, you may purchase Wrapped Bitcoin (WBTC) on Coinbase and then transfer it to your chosen Ethereum wallet. Coinbase Wallet and Metamask are two examples of good software wallets that can be used with Ethereum. Both wallets are simple to use and work well with decentralized apps.
After your WBTC has been transferred to your Ethereum Wallet, all that is required of you to begin collecting interest on your wrapped Bitcoin is to link your wallet to an application such as Compound or Aave.
Step 4: Earn interest
When you put money into an account that pays interest, you should start collecting that income as soon as possible after making the deposit. The amount of interest you earn on your savings account will differ from one bitcoin platform to the next and depend on the quantity of bitcoin you initially put into the account.
If you want to earn a significant amount of interest from bitcoin, keeping your funds in a savings account for the long term is a good idea because interest rates can range anywhere from 3% to around 10%. If you want to earn this kind of interest, keeping your funds in the savings account for as long as possible is best.
How Does Compound Interest Work for Bitcoin?
Two primary forms of interest may be earned from a savings account: simple interest and compound interest. Simple interest is the more straightforward of the two types. In the case of simple interest, an investor will only receive income on the primary amount invested. However, in the case of compound interest, an investor will gain interest not only on the main investment but also on the interest that was earned in the past. Compound interest contributes to your account's growth at a rate higher than the rate of simple interest.
Your savings account will add compound interest to your balance at intervals determined by the savings account provider you choose to work with. If you invest your money for a shorter period of time, your compound interest earnings will be higher. This is because as soon as the money you have already earned is transferred into your savings account, you will start earning more interest on top of the interest you have already earned.
BlockFi provides compound interest, which is added to your account regularly and accumulates over time. Nexo.io is the only platform that gives compound interest every day. Other platforms only give it every few days or even less often.
There is not much of a difference in the earning potential between compound interest deposited weekly and that deposited daily, despite the fact that shorter time intervals will cause your portfolio to expand at a quicker rate. When it comes to compound interest, quarterly or monthly intervals are much more important than daily or weekly intervals because the interest you earn at quarterly or monthly intervals is much higher than the interest you earn at daily or weekly intervals.
The Pros and Cons of Earning Interest in Bitcoin
Earning interest in Bitcoin may provide you with access to high interest rates, which is one of the main advantages of doing so. Most conventional savings accounts pay out yearly interest of less than one percent. However, bitcoin savings accounts often pay out interest rates that are at least five times as high as conventional savings account interest rates. And since interest is paid in Bitcoin, any increase in the value of Bitcoin will result in an increase in the amount of interest that you have earned.
The price volatility of the cryptocurrency presents the greatest threat when considering Bitcoin as a potential way of generating interest income. Even if you receive 6% interest on your bitcoin, the USD value of your account will remain the same after investing for a year even if the price of bitcoin decreases by only 6%. If you feel that the price of Bitcoin will increase over the long run, then opening a bitcoin account that pays interest might be a suitable investment for you.
Trading Bitcoin vs. Earning Interest
You, as a bitcoin investor, are going to need to decide if you are going to trade your bitcoin or HODL it. You can get more bitcoin by trading the ones you already have, but doing so puts your investment at risk of losing value due to market forces.
Trading cryptocurrencies is a high-risk approach since the prices of cryptocurrencies have been and will continue to be very volatile. Instead, most Bitcoin investors who have faith in the cryptocurrency hang on to their holdings to speculate on its value. Earning income on your Bitcoin holdings is a terrific, low-risk way to enhance your Bitcoin position if you expect to keep your Bitcoin for the long term.
That's all for today, see ya tomorrow
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