If you own cryptocurrencies, you might want to open a crypto savings account to raise the value of your holdings. So I’ve put together a list of the best crypto savings accounts for every type of saver.
These forms of “savings accounts” or “interest accounts,” like crypto itself, are very new. However, the rate of return is attractive and far exceeds the peak returns offered by FDIC-insured banks.
While these products can be exciting, they come with underlying liabilities that traditional bank savings accounts do not. I’ll address these risks as well.
So, if you’re thinking about investing in bitcoin solely because of the high return, you should do some further investigation.
However, keep reading if you already own cryptocurrency and want to earn a great return on it.
Defining Crypto-based Savings Accounts
Before starting a crypto-based savings account, it’s a good idea to learn everything there is to know about these products. After all, they do vary from ordinary savings accounts.
For starters, these accounts pay a return on your crypto assets rather than cash. Several crypto banks are currently giving excellent APYs (annual percentage yields) on the USDC currency.
US Dollar links to this currency and trades in a similar fashion but is not the real thing.
In fact, these accounts should be thought of as investments rather than savings accounts.
You make a cryptocurrency investment and then lend your keys to a third party in exchange for interest.
The operations behind the scenes with your crypto keys differ depending on whatever platform you use.
Benefits of Crypto Savings Accounts
We’ll get into the mechanics and risks of these investments later. But first, let’s take a gander at some of the benefits of crypto savings accounts on the entire cryptocurrency economy.
I’m talking about it in terms of the high-interest rate.
To begin with, it’s an automatic technique to develop crypto holdings over time.
For example, if you already have a massive amount of bitcoin, you can deposit it into a crypto savings account. Consequently, you’ll earn more bitcoin interest.
Moreover, crypto savings accounts remain an on-ramp for users to deposit their USD, CAD, AUD, and GBP.
Greater liquidity can be achieved by attracting more participants to the economy, resulting in eventual price stability for new assets.
Long-term crypto holders are also enticed to move their coins out of storage and into the markets.
This promotes acceptance and assists in the development of new use cases for crypto.
Finally, interest rates bridge the gap between people who have excess assets and people who require the assets for productive purposes.
Demand for the underlying crypto assets might be interpreted as high-interest rates being offered.
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How Much Do Crypto-based Savings Accounts Yield?
Two key aspects will influence your overall earnings (or losses) from a crypto-based savings account. The first consideration is the value of the cryptocurrency in US dollars.
The interest rate paid on the crypto savings account is the second.
The first significant aspect will almost certainly be the most important in deciding your overall earnings or losses.
If you maintain your savings account for a long time, this becomes a significant risk.
Cryptocurrencies are high-risk, unregulated investments that the government does not back like traditional currencies.
So if the cryptocurrency you have depreciates in value while your savings account is open, you may lose some of your principal.
This is analogous to the inherent hazards of foreign currency CDs.
A high-interest rate might be completely offset if the currency you’re holding depreciates in value compared to the US dollar.
The APY made on your crypto savings is the second variable. This depends on a variety of things.
Some of the biggest crypto banks listed in this article currently offer APYs ranging from 3.2% to 12%.
To put this in perspective, the standard savings account rate is just 0.05% APY, according to recent FDIC reports.
Who Exactly Are The Service Providers On This List?
Businesses that take the reins and allocate their crypto assets to others are known as lenders and exchanges.
These organizations will lend the crypto assets to other borrowers.
These “borrowers” are individuals or institutions in need of liquidity but unwilling to sell their bitcoin.
Most traditional banks will not accept crypto assets as security for a loan. That’s why these exchanges and crypto lenders are flourishing right now.
Interest rates are now relatively high, with consumers earning up to 12% in some situations.
Furthermore, by providing a high yield, it aids in attracting and onboarding more people into the crypto economy.
This is because in order to begin earning a high rate of interest. You must first convert your fiat currency into bitcoin or another cryptocurrency.
Due to the high rate of return, more people will join the crypto economy.
From February 2020 to January 2021, 20 million bitcoin wallets were created, according to Statistia.
This is a 43% increase over the number of wallets available last year.
The Difference Between Traditional Savings and Crypto Savings
Crypto-based savings accounts differ significantly from traditional ones.
We’ve already tackled some of the unique characteristics and risks associated with crypto-based savings. Here’s a quick side-by-side comparison:
|Traditional Savings||Crypto Savings|
|Interest Deposited Best APY||Monthly (0.3%)||Weekly or Daily (12.0%)|
Checking accounts, savings accounts, and money market accounts created with traditional banks or credit unions come with FDIC insurance.
This insurance, a.k.a. NCUA insurance for credit unions, protect your money if the institution goes bankrupt while your money is stored there.
The National Credit Union Administration (NCUA) and The Federal Deposit Insurance Corporation (FDIC) insure deposits up to $250,000 per person. Joint accounts get $500,000.
We can’t say the same with crypto-based savings accounts, where you can lose both principal and interest.
The government does not safeguard crypto investments and does not accept them as legal cash.
Many crypto institutions, on the contrary, will offer insurance against certain risks of loss.
Unfortunately, the most significant risk of failure is the uninsured exchange rate risk.
Many crypto-based savers use Stablecoins to hedge against exchange rate risk by tying the cryptocurrency’s value to a fiat currency.
Since April 2020, variable rate deposit accounts are no longer subject to transfer limits under federal regulation D.
The previous limit of six transfers was lifted in April 2020 as a result of Covid-19.
This resulted in millions of Americans losing their jobs, struggling to pay their bills. People had to tap into their savings during a time of crisis.
Check your financial institution’s limitations, so you don’t end up paying too much in transaction fees.
Withdrawing funds from crypto savings accounts, on the other hand, could be more limited.
Certain crypto-based deposits are contractual, requiring you to retain your funds on hand for a set length of time.
Other crypto-based deposits may be more pliable, but they come with a lesser rate of return to compensate. Finally, certain institutions levy set-up fees.
Because crypto-based savings accounts are a novel product, there isn’t yet any regulation surrounding them. So verify with the institution about their limitations and fees before making a deposit.
Another significant contrast between these accounts is how they calculate and deposit the interest.
With your deposits, most banks and credit unions compound interest daily, weekly, or monthly.
Compounding interest allows you to earn interest on the interest you’ve already made.
Simple interest often pertains to crypto-based savings accounts.
In particular, the amount for which interest computations are made is your initial principal.
One alluring feature of crypto-based savings accounts is that many institutions deposit your interest in smaller time increments.
Deposits can be made daily or weekly rather than the monthly deposit that banks and credit unions make.
As there is a rapid release of interest, you can put it to use sooner.
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The Best Crypto Savings Account For All Types of Savers
For Those Who Want The Best: BlockFi
Interest Accounts from BlockFi are available for ten cryptocurrencies and Stablecoins, including well-known coins like Bitcoin and Ethereum.
These accounts usually have the best rates for Stablecoins.
Stablecoins are cryptocurrencies whose value is directly linked to the value of a fiat currency such as the US dollar.
For example, USD Coin (USDC), GUSD, and PAX are all Stablecoins that can earn 9.0%.
BlockFi follows many current best practices in terms of security.
They protect user cash in cold storage, two-factor authentication, and wallet address “allow-listing” to prevent unauthorized transfers.
Insurance covers digital assets, and cash holdings are FDIC insured up to $250,000.
Their withdrawal costs, which vary by currency, are the only fees for their crypto interest accounts.
BlockFi has a limited exchange and offers crypto-backed loans in addition to their interest accounts.
For Beginners: Coinbase
Coinbase is more well-known for its exchange than for its interest accounts, but it’s still worth a look.
It’s incredibly popular with folks new to the crypto sector. It has over 50 coins to pick from and a user-friendly design. They do have a few interest-earning possibilities, but with restrictions.
On USD Coin deposits, Coinbase pays 1.25% APY (USDC).
They also started allowing chosen customers to stake Ethereum in April 2021, with up to 6% returns. You can join their waitlist since the service isn’t currently available to everyone.
Coinbase charges a variety of transaction and withdrawal fees, as well as a 0.50% spread. This depends on the amount, method, and location of the transaction.
Coinbase uses two-factor authentication, cold storage of customer cash, and address “allow-listing.” They’ve also purchased $250,000 in insurance for digital assets, as well as $250,000 in FDIC protection for cash holdings.
They do, on a limited basis, offer crypto-backed loans, but the service is now invite-only.
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For Those Who Prioritize Ease of Use: Voyager
Voyager is a straightforward platform that provides cryptocurrency interest accounts.
Voyager offers rates ranging from 1% to 9% on 24 cryptocurrencies and Stablecoins, with varying minimum monthly amounts.
Each month’s interest is due on the fifth day of the month. Withdrawing interest-bearing assets can take up to seven days. Withdrawals are subject to fees that vary by currency.
Voyager needs two-factor authentication, and FDIC insures cash funds up to $250,000.
Residents of the United States can also participate in Voyager’s exchange program, which is set to grow internationally.
For Those Who Want Daily Interest: Nexo
Nexo’s high yield interest accounts pay up to 12% APY on 17 different cryptocurrencies daily. Only Nexo’s loyalty program members, which is based on holding their native coin, NEXO token, get the best rates.
Cryptocurrencies such as Bitcoin, Ethereum, and Ripple have rates ranging from 4% to 8%.
Stablecoins like USDT, USDC, and DAI, plus cash deposits in USD, GBP, and EUR, earn between 10% and 12%.
Their base rates aren’t usually as high as those offered by other sites. However, they do give incentives based on a variety of parameters.
After users exceed a certain number of free withdrawals each month, which varies by tier, Nexo levies withdrawal fees for crypto.
All deposits and withdrawals of fiat and credit lines are free.
Nexo has secured $375 million in digital asset insurance with firms like BitGo and Ledger Vault.
This is in addition to security features like two-factor authentication, withdrawal confirmations, and login notifications.
They also have a no-fee exchange (albeit relatively widespread), crypto-backed loans, and the Nexo Card.
This allows you to borrow in real-time against your crypto credit line from stores all around the world.
For Those Who Want The Highest Rates: Celsius Network
Celsius has some of the highest interest rates on the market. Their rate ranges from 2.02% to 17.78% on 14 different cryptocurrencies.
People who hold large amounts of Celsius Token in Celsius’s interest-earning accounts (CEL) get the maximum interest rates
Their base rates, on the other hand, are typically higher than the national average.
There are extra benefits to receiving interest payments in CEL rather than the currency you initially invested in.
CEL is now only available to international customers and accredited investors, which is unfortunate for US investors. In this scenario, the highest rate is 13.99%.
They, like BlockFi, provide declining profits on rising Bitcoin amounts.
If you want to buy coins through Celsius, their partners will charge you a variety of fees. Fortunately, there are no fees for withdrawals.
HODL Mode, which prevents withdrawals, 2FA, and address “allow-listing,” are all security features offered by Celsius.
Coins that are out on loan and earning interest cannot be insured. But when they aren’t on loan, custodians Fireblocks and PrimeTrust insure them.
Celsius offers crypto-backed loans and allows users to deposit and receive bitcoin conveniently using their app, CelPay.
For Those Concerned With Security: Gemini
Another well-known bitcoin exchange, Gemini, has added interest accounts to its portfolio.
They offer a diverse choice of 28 currencies, with daily compounded rates ranging from 1.26% to 8.05% APY.
Agent costs, which vary each coin and range from.04 to 4.3%, are charged by Gemini Earn.
Gemini provides free cryptocurrency deposits.
Withdrawals are free for the first ten coins per month; afterward, fees apply depending on the cryptocurrency.
While Gemini Earn investments are not insured, borrowers are assessed for risk management and go through reputable third-party borrowers.
Most crypto is held offline, in geographically spread facilities, and Gemini has top-of-the-line cyber-security, 2FA, and “allow-listing.”
They also have a bug bounty to dissuade potential hackers.
They’ve got $200 million in insurance, which is the most of any cryptocurrency custodian.
They also have Gemini Wallet, Gemini Pay, and Active Trader, an advanced trading tool.
For Those Interested in Long-term Holding: Crypto.com
Crypto.com is a full-service crypto hub that provides a variety of options for earning income on your cryptocurrency assets. They provide around 35 different cryptocurrencies and Stablecoins.
For cryptocurrencies like Bitcoin, their Earn feature offers rates ranging from 0.5% to 8.5% and 14% for Stablecoins like USDC. They make weekly payments in USDC.
Their peak rates, on the other hand, aren’t easy to obtain. They are based on Staking CRO and terms (1 month, three months, and Flexible).
Without staking, three-month periods on Bitcoin and Ethereum can yield up to 4.5% returns. Most Stablecoins can yield up to 10%.
With Stablecoins, the most you can earn on a flexible term with no CRO stake is 6%.
So Crypto.com is excellent for people who plan to maintain their assets for at least a year or longer.
A lot of time and money investment is required.
Crypto.com uses security procedures similar to those used by other sites.
They have two-factor authentication, cold asset storage, FDIC insurance for currency deposits, and a bug bounty.
Crypto.com stands out as an all-in-one cryptocurrency service.
They have an exchange, crypto-backed loans, a variety of Visa Rewards cards, and a mobile payment service.
Plus, you get custodial and non-custodial wallets and even a market for NFTs in addition to their interest accounts.
For Those Interested In Active Trading: YouHodler
What makes YouHodler distinct is the opportunity to trade using cryptocurrencies that are collecting interest in their interest accounts.
It’s also ideal for collateral because of their crypto-backed loans through their Multi HODL service.
They have interest accounts for 25 cryptocurrencies, with more on the way. Their rates start at 2.5% and rise to 8% for crypto and 12.7% for Stablecoins.
Interest is amassed on a daily basis and paid out once a week. YouHodler has flat rates, which means there are no tiers for earning more.
Deposits in crypto are free, but withdrawal costs vary depending on the currency. Withdrawals of significant coins like BTC, ETH, and LTC are free.
However, you’ll be charged a blockchain fee that varies based on the network workload and capacity.
They protect their money with pooled crime insurance worth $150 million, two-factor authentication, and a combination of hot and cold storage.
The platform also gives the option to halt withdrawals. NFTs, crypto-backed loans, and a margin trading market are also supported.
For Those Who Primary Deal in US Dollars: Outlet Finance
Outlet Finance could be your best alternative if you do not study cryptocurrency trends. It’s understandable to still want to play in the field and earn an excellent return while doing so.
Because this network works with US dollars, you don’t need to know anything about cryptocurrency. Users deposit cash in US dollars and receive interest in US dollars.
Outlet Finance transforms your money into Stablecoin and connects it to their overcollateralized loan partners, matching it with the best rate.
Their partners must put up 120% of their loan requests if they are overcollateralized. If they default, this is liquidated to pay the investor, which helps to reduce your risk.
APYs of up to 6% is touted by the company.
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The Hazards of Crypto Savings Accounts
Even though a crypto-based savings account has its benefits, it also carries the danger of losing money. Let’s take a look at some hazards that come with these investments.
After all, I’m sure you want to understand what you’re getting into fully.
Stablecoin Peg Breaking Risk
Stablecoins are designed to sustain a set value in connection with another asset, such as the US dollar.
So if the Stablecoin’s value cannot be maintained in relation to the assigned asset, investors will lose faith in the Stablecoin. As a result, its value usually plummets.
It’s vital to remember that not all Stablecoins are the same.
Some Stablecoins are administered centrally and ensure to keep US money safe in a vault with constant audits.
Fortunately, other Stablecoins are decentralized, with machines and computer code rather than humans managing them.
Each of these forms of Stablecoins, it could be claimed, carries its own set of hazards.
In the first case, the central bank could go back on its word and mismanage the business. This causes the peg to the US dollar to fragment.
In the case of the latter, a coding error could be detected in the future. This coding error causes the peg against the US dollar to be broken.
If the peg breaks, the investment may flee the Stablecoin, perhaps resulting in a loss of principal.
Exchange Rate Risk
There’s a chance that the underlying crypto will lose value compared to your base currency (USD, GBP, etc.).
A cryptocurrency’s value is not supported by the government and is not considered legal cash.
Moreover, the accounts into which the cryptocurrency is deposited to earn interest are not covered by the FDIC or SIPC.
You will lose your principal invested amount if something happens to that cryptocurrency, causing it to lose its underlying worth.
Several crypto savings accounts pay interest in crypto. Apart from your underlying investment losing value, the interest you’re earning is declining too.
If you have an appreciating underlying asset, however, the converse is true.
Savors choose to utilize Stablecoins in their crypto savings accounts because of erratic values.
You no longer have control over the cryptocurrency and are pledging it as security.
Once you deposit money in a bank, for example, you are laying a claim on the bank’s responsibility.
Consequently, the crypto savings account is in a similar scenario (minus the federal protections).
You will be unable to obtain your bitcoin or cryptocurrency back if the crypto provider goes bankrupt.
Please note that these providers might fail in terms of poor business management or a market event.
This is due to the fact that you no longer control the cryptocurrency when you deposit it into a savings account.
Lock Up Risk
Some cryptocurrency savings accounts are pretty flexible, letting you withdraw funds at any time.
Unrestrained withdrawal behavior in other crypto interest accounts may result in lockup periods or additional costs.
In general, the more limited accounts will pay a higher interest rate. On the other hand, the more unrestricted accounts pay a lower interest rate.
When you decide to take the plunge, make sure you get all of your questions answered.
Learn about lockup periods, withdrawal limits, and any additional fees.
Custodian Hack Risk
If the lending company’s custody provider (where the assets are housed) is hacked, it poses a serious danger.
If you operate a cryptocurrency exchange’s crypto savings account, a compromise at their custodian could result in a theft.
Many newcomers to cryptocurrency are concerned about the blockchain being hacked.
The risk of a hack, on the other hand, is not to the blockchain but to the institution’s security.
It’s vital to remember that the chance of a ‘hack’ is higher when dealing with a newer organization.
This also applies to those who don’t invest as much in safety as others.
Organizations that have been around for a longer time are usually robust because they have stood the test of time.
Loan Default Risk
The loan could be defaulted on if the value of the collateral underlying the loan is insufficient to repay the lender.
Even though this is a legitimate concern, most crypto loans are typically overcollateralized, lowering the risk significantly.
In other words, borrowers frequently keep collateral equal to 150% of the loan amount.
So even if the collateral value drops due to poor market conditions, the loan will be supported.
It lets the borrower repay the loan or the lender sell the stake on the open market.
If a severe market correction drives the value of cryptocurrencies extremely low, very quickly, the loan default risk may arise.
Simply put, markets would have to drop 50% in a matter of minutes, which has yet to happen.
Smart Contact Risk
Decentralized finance (Defi) lenders use intelligent contracts to loan and allocate capital. This coding is transparent since anyone can see it.
Everyone is motivated to ensure that the coding is sound.
A previously unknown flaw in a smart contract, on the other hand, could allow a hacker to gain access.
A defect in the coding, for example, could result in the lender losing the funds.
This is akin to the custodian hack danger in that newer, untested lenders’ intelligent contracts may not have been tested.
Lenders with extensive experience and goods that have survived the test of time are less likely to be affected.
However, they’re never immune to risk.
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How To Use USD To Buy Bitcoin
You have a few alternatives when it comes to financing your account for Bitcoin purchases. They aren’t all available on every exchange, and the fees they charge may differ.
Wire transfers are very similar to ACH transfers in terms of procedure.
You must first connect a bank account to your exchange to make a deposit, then choose a wire transfer.
Cash wired before 1:00 p.m. Pacific Time will be available the same day.
Money wired after that will be available the following business day.
You’ll need to authenticate your bank account before you can transfer money, which you may do through exchange apps.
You can deposit USD to buy Bitcoin once your account is connected. Your cash may take 3-5 business days to become available.
Credit or Debit Card
You can deposit with a debit or credit card at some exchanges. Those who do will ask for your credit card number and personal information in order to make a deposit.
Please note that some banks may charge you extra fees if you use your credit card to make a deposit.
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If you presently own cryptocurrencies, putting them in an interest-bearing account is a terrific way to generate money.
That said, be cautious if you’re thinking of investing in bitcoin because of the appealing APYs on the savings side. Make sure you’re aware of the significant capriciousness of these digital currencies.
One should also carefully review each account and crypto bank because of terms and conditions, interest rates, and minimum deposits.
Note that lockup periods differ significantly from one account to the next.
These accounts are likely not for you if you’re a conservative saver.
This might not be a good idea if you find it difficult to stray from traditional CDs, savings accounts, and money market accounts.
They’re also not a good place to keep emergency savings or money that has to be converted into cash immediately.
Please note that they are variable-rate accounts, which can alter at any time and without notice.