Bitcoin has been criticized by certain people in the past for being an asset that does not yield any dividends, but this argument no longer holds any water.
Many crypto investors store their digital assets on exchanges like Kraken, Binance and Coinbase for long-term safekeeping. Doing so means they are assuming counterparty risk, however, so in my opinion, if you’re going to opt for keeping your crypto with a third-party custodian, you might as well put it to work.
These are my favorite crypto lending platforms where you can earn interest on your crypto and also obtain loans by providing crypto as collateral.
- BlockFi – biggest and most established crypto lender
- YouHodler – biggest number of cryptos supported, lowest fees
Alternatively, you can store your crypto in cold storage, but you won’t be able to grow your wealth in that way unless your crypto asset prices appreciate over time.
In this post, I’ll show you how you can earn 5% and upwards on your Bitcoin by using the interest accounts on the platforms featured here.
Most of the platforms I will describe help you earn interest on your crypto by implementing some form of lending. I have written extensively about my P2P lending experience and my favorite P2P lending platforms, but today we’ll add the crypto factor into the mix – hence we will be talking about crypto-backed loans. In my opinion, as an investor, the addition of crypto as collateral marks a huge improvement over the traditional P2P lending platforms, which can lack transparency and that mostly work with no collateral.
Crypto lending is becoming a huge industry, and we can take a look at Google trends to verify this. Have a look at the chart showing a strong worldwide uptick in interest in crypto lending options over the past three years.
Let’s take a look at the best platforms available. One of the important things to note before we start is that these platforms exclude fewer people than traditional P2P lending platforms. While the traditional platforms operate within very strict geographical limitations, with crypto lending platforms basically anyone who holds crypto can participate.
Blockfi – Overall Best Crypto Lending Platform
Blockfi offers two products to investors:
- BlockFi Interest account
- Crypto-backed loans
The BlockFi Interest Account (BIA) lets you put your crypto to work and earn monthly interest payments in the asset-type that you deposit with BlockFi.
BlockFi clients using the BIA earn compound interest in crypto, significantly increasing their Bitcoin, Ether, and Gemini Dollar (GUSD) balances over time.
Crypto-backed loans allow you to access liquidity without selling. By using your crypto as collateral, you can unlock up to 50% of the value of your assets in USD. You can obtain a loan within a day (in USD or stablecoins).
BlockFi clients use crypto-backed loans to do anything from paying off credit card debt to buying a home. Businesses turn to BlockFi to help them with payroll financing and business expansion. There are many advantages to borrowing instead of selling, including tax benefits.
With BlockFi you can earn up to 8.6% on your crypto. Note that this product is focused on USD, not on any other fiat currency, and while there is no big downside there, it’s worth noting that if you are using a EUR or GBP based stablecoin you will need to convert those coins to a USD stablecoin like USDC or GUSD in order to start earning interest in a BlockFi interest account.
BlockFi offers a rate of up to 6% on Bitcoin, which is one of the highest rates I’ve seen. On the other hand, there are withdrawal fees that need to be kept in mind, which average around €35 per withdrawal.
You are given one free withdrawal per month, however, which should be sufficient for most long-term crypto holders who just want to place their money in secure custody and earn interest. They wouldn’t be doing many withdrawals anyway.
Read my in-depth BlockFi review or just hit the link below to begin earning interest on your crypto or obtain a loan.
YouHodler offers an extensive set of crypto-fiat financial services. In its essence, the platform intends to help investors take advantage of cryptocurrencies, without having to actively trade them.
YouHodler has managed to make crypto-HODLing an active strategy. For investors, access to a crypto-exclusive savings account and interest-bearing loans are preferable ways to expand your portfolio.
This solves an instant issue with digital currencies – opportunity costs. That is to say, rather than leaving your digital coins sitting idle in a private wallet, YouHodler allows you to earn a yield on your holdings. At the same time, you get to keep hold of your investment and thus – you can cash out your coins whenever you see fit.
YouHodler implements some innovative strategies to boost your returns, so it is an ideal platform for those who like to tweak things and see what works best. The company is registered in Cyprus and is regulated in Europe, while client funds are stored securely within the Ledger Vault platform.
You can also use YouHodler as an exchange to trade cryptocurrencies. If you’ve already made some amazing profits on your Bitcoin, perhaps it’s time to give yourself a break. For example, YouHodler savings accounts pay 12% annual interest on stablecoins. Hence, you could do a Bitcoin to fiat exchange with just a 2% fee right on our platform, and then convert fiat to your favorite stablecoin in orer to start earning interest.
You can read my full review of Youhodler if you want to learn more about this platform, or just click the link below to go to the Youhodler website directly and get started.
CoinLoan is a P2P lending platform for cryptoassets backed loans, based in Estonia.
Here’s how it works.
As a lender you first deposit fiat funds or stablecoins. The borrower, on the other hand, deposits cryptoassets to secure a loan.
Once the lender and the borrower are matched, a smart contract is used to ensure the borrower pays on time, else he would risk his crypto collateral.
Once the loan is paid off, the lender gets his principal returned plus interests, while the crypto assets are returned to the borrower.
Read more: My in-depth review of Coinloan
Lenders have a significant benefit in thus having the ability to lend to people with verified collateral available. CoinLoan acts as the custodian for a safe and clear experience.
It’s worth noting that CoinLoan is licensed in Europe and well regulated. The platform also implements an AML policy.
With Binance, you have several ways of earning money on your cryptos.
The easiest way is probably using their Flexible Savings product. Flexible Savings is your Crypto savings account. Subscribe your crypto to earn interest, with the flexibility to redeem your funds at any time.
To quote a few estimated annual yields available at the moment, we have:
- BUSD at 2.44%
- USDT at 2.11%
- DASH at 1.83%
There are 24 coins you can use for the flexible savings account.
For higher returns, you will want to opt for the Locked Savings product. By subscribing your crypto to locked savings periods you will in return get higher interest earnings. You can choose from several durations depending on the coin you are using, but it’s typically one or more options from the following:
- 7 Days
- 14 Days
- 30 Days
- 90 Days
For example, with BUSD you get an annualized interest rate of 7.42% at the time of writing, while USDT gives you 6.79%. Both of these are stablecoins that can be easily bought from the Binance exchange itself.
The range of coins available for locked savings is more limited, we can only choose between 6 coins: BUSD, USDT, COCOS, ONE, EOS.
You might have heard of staking, which can be used for those coins that use a Proof-of-Stake mining mechanism. With Binance you can stake 24 different coins, with the returns varying significantly between one coin and another. Among the highest yielding are KAVA (14-16%), LOOM (10-12%) and ZIL (8-10%)
Lendary describes itself as an alternative peer-to-peer lending service that generates returns by automating and optimizing a process that is quite different from the traditional activity of lending money to individuals or small businesses: ‘Margin funding’.
At its core, Lendary is an automation software for margin funding and takes over the constant and optimal lending of your funds on a crypto exchange 24/7.
What I like most about Lendary is that it combines a few interesting features of investment products:
- It is a high-yield way of investing your money;
- it is completely uncorrelated to all other asset classes (also uncorrelated to crypto markets),
- it profits from a really innovative way of risk management (Lendary also didn’t have any drawdowns during the Covid crash in March as opposed to most traditional P2P services),
- it has daily liquidity due to the short holding period for loans.
Read more: My in-depth review of Lendary
For anyone who is interested in earning daily interest rates on a level that exceeds most of the traditional products and who doesn’t shy away from trying something new, you should definitely give Lendary a try.
I’ve tried out all these platforms and found YouHodler and BlockFi to be the ones I liked most. The platforms mentioned in this post all work fine, but you’ll need to find the one that has the best branding and user interface for your tastes. Some of them also reward you in their native tokens, but in general, I prefer going for Bitcoin rewards.
What do you think of P2P lending platforms that provide crypto-backed collateral? I think it’s a nice upgrade on the traditional P2P lending platforms and as an investor it gives me more security.