These days, anything you can do to make a little extra money is a plus. Make it passive income and that’s even better, which is why so many people jumped on the crypto craze, to begin with. Free money, right? If you are holding cryptocurrency, you can actually make money by lending it. Well, sort of. Let’s take a look at how to make money by lending cryptocurrency.
What is Crypto Lending?
Cryptocurrency lending, like many forms of lending, is a little convoluted. When put simply, it allows crypto holders to borrow physical money (USD) without having to sell their crypto holdings. At the same time, investors are able to lend their digital assets and earn interest. So, investors lend crypto to borrowers in exchange for dividends. Here is an example of how this might work.
Jim Bob is the owner of 10 glorious Bitcoin. He’s wondering how he might be able to earn some passive income with those coins. That’s where crypto lending comes in. If he chooses to do so, Jim Bob can deposit his 10 Bitcoin into a wallet on a cryptocurrency lending platform. After that, he will start receiving weekly or monthly dividends.
How Much Interest Can You Earn?
For most lending platforms, the interest rate is between 3% and 7% for crypto lending. However, more stable assets, like Binance USD, can bank you as much as 17% interest.
What’s the Risk?
As with any kind of investment, there is some risk associated with crypto lending. In a lot of ways, it is like peer-to-peer lending. The investor assumes most of the risk in the situation. Changes in the interest rate, as well as the price of the coin, should also be considered during your risk assessment.
Unlike P2P lending, borrowers in the crypto lending space are required to stake 25% to 50% of the loan amount in cryptocurrency. That way, if they are unable to see out the terms of the loan, the investor won’t lose all of their money. In addition to the borrower being required to stake a portion of the loan in crypto, the lending platforms have insurance that will help investors collect any other money lost.
How to Make Money Lending Cryptocurrency
Now that you know a bit about what lending cryptocurrency is and the risks behind it, you can make an educated decision on whether or not it’s for you. There are a number of platforms you can pursue your new passive income endeavor. In fact, there are more than a dozen available. The key is to find one that works with the cryptocurrency you hold, deposit your digital tokens, and then start accruing interest.
If you are an avid investor in the crypto world, you probably have some coins lying in different digital wallets on the web. Utilizing one of the platforms that allow for borrowing and lending can help you earn cash without having to do much of anything. For cryptocurrency investors, it could really be a great way to earn regular dividends in an otherwise erratic market.