The global impacts of the COVID-19 pandemic combined with economic crises in the last decade have left many worrying about their money’s value. With just a 1% annual interest rate, traditional savings accounts no longer seem the safe option.
As a result, many investors are searching for better appreciating assets to generate interest, and Bitcoin seems to be a popular option nowadays. But the number one question on their mind is, does Bitcoin gain interest? The answer is yes. There are several ways to earn interest in Bitcoin, and we’ll explain three of them right here.
1. Interest accounts
You can buy Bitcoin along with several other cryptocurrencies from centralized and decentralized finance platforms. These accounts allow you to borrow or lend Bitcoin to others, trade crypto and even earn interest quite similarly to traditional savings accounts.
Similar to a bank account, you can withdraw Bitcoin from your account plus the amount of interest earned during that time. Unlike a traditional account, Bitcoin is not regulated by governmental or financial authorities, which frees you from certain political and legal interventions.
2. Decentralized Lending
Decentralized Lending is when you want to lend Bitcoin without the interference of a financial middleman, such as a bank. These types of arrangements are done automatically through smart contracts which operate via a transaction protocol or a program that executes the transaction once agreed by parties in a deal.
There are centralized platforms that can rent crypto to businesses to enhance their liquidity or fortify their investment portfolio. There’s mostly a lockup period associated with renting Bitcoin, meaning that you cannot touch the currency for a specific period. For instance, you may get a 4 percent annual interest with a minimum lockup period of two months. In most cases, an extended lockup period will earn you a higher interest rate.
Today, there are many crypto wallets, exchanges, and OTC desks that allow you to stake Bitcoin. Staking is where someone locks up their Bitcoin in a smart contract to earn interests or other rewards. In a basic way, it is somewhat similar to putting your money in a bank account, but that’s where the similarity ends.
You are rewarded with a small interest rate with banks just because you let them keep your money. OTC desks use your Bitcoin to build new blockchain blocks and reward you for contributing to the network.
Two Types of Bitcoin Interest
Crypto lending platforms are perhaps the easiest way for beginners to start gaining interest in their Bitcoin. The interest can be either simple or compound. Simple interest is when you only gain money from your principal Bitcoin, but compound interest will earn you more on the principal plus previous interests.
Needless to say, compound interest is a better option. A key element is how often the compound interest will be injected into your account. That depends on the lending platform, but the more, the better. Some platforms offer monthly compound interest, while others increase your Bitcoin holdings every week or even every day.
You don’t have to be too picky over choosing between weekly or daily intervals because there isn’t a substantial difference in their earning potential. That becomes more crucial with quarterly or monthly intervals because the difference is nowhere comparable to weekly and daily interests.
You may be thinking to yourself, how much does it cost to invest in Bitcoin and earn these interests? Not much. You can start small and work your way up. OTC desks are mostly better than traditional exchanges because they don’t have liquidity problems, deposit/withdrawal limits, and they offer far more security.
Start Earning Interest in Bitcoin
The staggering rise of Bitcoin has led many to think of investing in crypto. In this article, we’ve provided a clear answer to the question, does Bitcoin gain interest? For many, especially beginners, crypto-based saving accounts are a safer approach than trading in a volatile crypto market.
This method is a low-risk strategy that allows you to hold such a valuable asset over a long time and earn additional interest by contributing to the blockchain. All you have to do is find a reliable, low-cost platform that allows you to easily invest in Bitcoin and watch your money grow. The good news is that you don’t have to look very far because Secure Digital Markets has all the tools and expertise you need. So, don’t hesitate to contact us as we are ready and waiting to answer all of your questions and get you started!