Most of you have heard about cryptocurrencies like Bitcoin – either via friends or directly from the media. Some of you may also have invested in one or the other cryptocurrency based on advice from family and friends. And the majority of you are keeping those coins in a crypto wallet, where the coins gather dust and don’t do anything for you. That has to change!
A crypto wallet is not the same as a crypto savings account, with the main difference being that the latter accrues interest whereas a crypto wallet doesn't. When you just keep your coins in a wallet where you own the private keys or in an exchange wallet, then your investment will not earn any interest – assuming you are not withdrawing any coins, then the number of coins will always remain the same.
This applies to almost all cryptocurrency wallets out there, but thanks to the inventions coming from the DeFi (decentralized finance) space, some wallets are now able to accrue interest for you. These kinds of wallets can be found on platforms such as Cake DeFi and are easily accessible for anyone.
Putting your coins into a crypto savings account can be quite lucrative, but it also comes with some limitations: For instance, you are not able to freely transfer your coins in and out of such an account. Some of these crypto saving wallets lock your coins away for a few days up to a few weeks, depending on the amount of interest they pay you. If you don’t need immediate liquidity on your investment, then holding your coins in a crypto savings account would make more sense than keeping your coins in an ordinary crypto wallet.
The first thing you have to do when you want to invest your crypto into a crypto savings account is to compare account providers. Not every provider is the same and differs along some crucial factors. The following 3 factors should always be considered when you select a crypto savings account provider.
A cryptocurrency savings account works in a similar fashion to traditional savings accounts you know from your bank. When you put money into a savings account, then you grant the bank permission to loan out the money to bigger institutional banks and investors. In return, you receive a pre-set amount of interest, paid directly into your account.
The very same idea applies to a cryptocurrency savings account, where you invest your funds into popular coins like Bitcoin, Ethereum or DeFiChain’s DFI. These funds will then be loaned out by the savings account provider to external partners or borrowers, and in exchange, you will receive an annual percentage yield. The good thing about a cryptocurrency savings account is that you can also limit your exposure to highly volatile assets like Bitcoin or Ethereum by investing via stablecoins pegged to the US-Dollar.
A few important differences between a traditional savings account and a cryptocurrency savings account have to be addressed:
The big question is: Should you now open a cryptocurrency savings account? There is no clear answer to that, because it depends on what you’d like to achieve with your funds. A cryptocurrency savings account produces well above average yields for long term investors, yet with an undeniably higher risk than traditional banks, assuming you are not mainly using stablecoins that are pegged to the US-Dollar or other fiat currencies.
Therefore, you should never put more money into the crypto market than what you can afford to lose. If you’d like to be on the safer side though, then look no further than stablecoins like USDT or USDC. Both stablecoins can get you well above average yields of 8% APY.
Cake DeFi just recently introduced its new cryptocurrency saving account product for USDC stablecoins called USDC Lending. Investing via Cake DeFi is super easy and straightforward.
If you haven’t yet opened an account with Cake DeFi yet, then you should take advantage of the sign-up promotion, where you can get an immediate US$ 20 deposited directly into your cryptocurrency savings account.