There are various ways to earn interest on crypto, ensuring that tokens do not sit idle in private wallets or exchanges. Examples include crypto savings accounts, staking, and yield farming.
In this guide, we explore the different ways to earn interest on crypto and which platforms to consider for this purpose.
How to Earn Interest on Cryptocurrency – Step by Step
Let’s get straight into it – here’s an overview of how to earn interest on crypto at the regulated broker eToro.
- Step 1: Open an eToro Account – Visit the eToro website and open an account. This is required to buy crypto and earn interest on the purchase. Provide eToro with some personal information and contact details.
- Step 2: Deposit Funds – Before buying crypto and earning interest, the investor will need to make a deposit. Instant payment methods accepted by eToro include debit/credit cards, Paypal, Neteller, and other e-wallets. The minimum deposit is just $10. Payments made in USD are free of any charges.
- Step 3: Buy Staking Coin – To earn interest on eToro, the investor will need to buy a staking coin. In doing so, interest will be earned automatically. Currently, the three options are Ethereum, Cardano, and Tron. Some investors will buy all three for diversification purposes.
- Step 4: Earn Interest on Crypto – Depending on the chosen staking coin, interest will automatically be earned after 7-10 days. After the grace period has passed, interest will be earned for each day that the coins are held in the eToro account. Penalty-free withdrawals can be made at any time.
Read on for a more comprehensive guide on how to earn interest on crypto.
Where to Earn Interest on Crypto
In this section, we discuss where to earn interest on crypto. We review five top-rated places, each offering a different way to earn interest on Bitcoin and other digital tokens.
1. eToro – Overall Best Place to Earn Interest on Crypto (Tier-1 Regulation)
eToro is the best place to earn interest on crypto 2023. First and foremost, eToro offers a staking facility, and there is no requirement for investors to opt-in. Instead, interest will be earned simply for buying and holding crypto on the eToro platform. This includes support for three of the best staking coins – Cardano, Ethereum, and Tron. As noted above, the staking rewards will automatically be paid after 7-10 days of holding the coin.
eToro takes care of the staking procedures behind the scenes. This makes eToro a great option for investors that want to earn interest on crypto passively. Investors will earn between 75% and 90% of the staking rewards generated by eToro. This will depend on the investor’s account tier, running from bronze to platinum. Most importantly, there is no lock-up period on eToro. This enables investors to withdraw their coins from the staking pool at any given time.
There are no minimum holding periods nor any penalties for making a withdrawal. To start earning interest, the first step is TO open an account with eToro and make a deposit of at least $10. eToro supports debit/credit cards, e-wallets, and bank transfers. USD payments are fee-free while other currencies attract a small charge of 0.5%. Nonetheless, after making a deposit, the user can then proceed to buy Cardano, Ethereum, and/or Tron. After the initial grace period, the staking rewards will be updated in the user’s account every 24 hours.
This is great for keeping tabs on how much interest is being earned. In addition to staking coins, eToro also supports some of the best emerging cryptos. This includes the likes of Uniswap, SushiSwap, Cosmos, and Decentraland. Some of the best meme coins are also supported, such as Dogecoin and Shiba Inu. And of course, eToro also supports Bitcoin. When it comes to safety, this is eToro’s standout feature. It holds licenses with several regulatory bodies, including FINRA, FCA, ASIC, and CySEC.
The eToro mobile wallet app is licensed by the GFSC. This makes eToro one of the best crypto apps for earning interest on the move. The eToro app also comes with other top features, such as exchange services, token swaps, copy trading, smart portfolios, and much more. Another benefit of choosing eToro for earning interest on crypto is that it offers unparalleled customer service. Registered users can simply hit the ‘Live Chat’ button to speak with an agent in real-time.
On the flip side, eToro is limited in the number of cryptos it supports for staking interest. But more coins will be added in the near future. Moreover, eToro might not be suitable for those targeting huge yields. Instead, eToro takes a safe and risk-averse approach to earning interest on crypto. Ultimately, this is a more sustainable strategy in the long run.
Platform | Interest-Bearing Coins | Interest Rates | Key Terms |
eToro | Ethereum, Cardano, Tron | Up to 90% of staking rewards generated by eToro |
Must hold an eligible crypto for 7-10 days before interest is generated. No lock-up terms. No withdrawal penalties.
|
What We Like
Cryptoassets are a highly volatile unregulated investment product.
2. Crypto.com – Earn Interest via Flexible and Fixed Savings Accounts
Crypto.com – one of the best crypto exchanges in the market, offers various savings accounts. Put simply, investors can deposit their tokens into a Crypto.com savings account and earn interest. The tokens will earn interest for as long as they remain in the savings account. Crypto.com savings accounts are available on some of the best cryptos to buy. This includes Bitcoin, Ethereum, Cardano, Polygon, Polkadot, Solana, and Fantom. We also like that Crypto.com supports stablecoins, including Tether, Dai, Pax Dollar, and USD Coin.
The best DeFi interest rates will vary depending on several factors. For example, Crypto.com offers three lock-up terms on its savings accounts – flexible, one-month, and three-month. The longer the term the higher the interest rates. Moreover, higher interest rates are offered when staking CRO tokens. This is the native token fueling the Crypto.com ecosystem. The more CRO staked the higher the rewards. This is broken down into three tiers; under $4,000, between $4,000 and $40,000, and over $40,000.
For instance, investors can earn 6.5% on USD Coin deposits when locking the tokens for three months and staking at least $40,000 worth of CRO. This is reduced to 4.5% when CRO isn’t staked. The main drawback with Crypto.com is that interest rates on flexible accounts are minute. For example, Crypto.com pays Bitcoin interest rates of just 0.1%. This is also the case with flexible accounts on Ethereum, Algorand, and BNB.
Therefore, Crypto.com is better suited to investors that are comfortable locking their tokens for three months or more. In addition to savings accounts, Crypto.com also offers a fully-fledged exchange and NFT marketplace. It also offers. DeFi wallet, crypto loans, and a prepaid debit card. Finally, Crypto.com is considered a safe platform that is used by over 70 million clients.
Platform | Interest-Bearing Coins | Interest Rates | Key Terms |
Crypto.com | 21+ coins, including Bitcoin, Ethereum, BNB, Cardano, Solana, and several stablecoins. | Up to 12.5% |
The highest rates are offered on three-month lock-up terms and require at least $40,000 worth of CRO tokens to be staked.
|
What We Like
3. Binance – One-Stop Shop for Savings Accounts, Staking, and Yield Farming
Binance – the world’s largest crypto exchange, offers many different ways to earn interest on crypto. First, there is the ‘Simple Earn’ feature, which functions as a crypto savings account. Dozens of cryptos are supported, and interest rates are competitive. For example, investors can earn up to 49% on a 120-day lock-up period when depositing Ape Coin. Axie Infinity – which is one of the best crypto games, attracts interest of 37.9% on a 90-day term.
Those preferring flexible savings accounts might consider Ethereum or Tether, paying up to 4.08% and 2.41% respectively. These rates are subject to change. Another option at Binance is staking, 14 tokens are supported, including Litecoin, XRP, Ethereum, AAVE, and BNB. The best rate available is offered on XVS tokens at an APY of 6%. We also found that Binance is one of the best yield farming crypto platforms.
For example, farming IDEX/USDT or IDEX/BNB will yield an estimated APY of 174% and 156% respectively. While BEL/USDT and STX/USDT will yield 32% and 25%. Another way to earn interest on crypto at Binance is via its dual investment tool. This combines the fruits of options-style trading and interest accounts. Put simply, rewards are paid based on the closing price of the chosen cryptos on a specific date. For example, if Bitcoin closes above $29,000 in the following month, Binance will pay an APY of 32.61%.
Although Binance is one of the best places to earn interest on crypto, there are some drawbacks to consider. First, Binance’s regulator status still remains unclear. This is why investors in some countries, such as the UK, will often see Binance’s fiat payment facility suspended. Additionally, Binance is more suited to experienced investors. Many of its interest-bearing tools are complex and come with complicated terms. Therefore, beginners might want to consider other options.
Platform | Interest-Bearing Coins | Interest Rates | Key Terms |
Binance | Hundreds of coins – including micro, small, medium, and large-cap tokens | Depends on the interest-bearing tool. For instance, up to 49.9% on savings accounts and 174% on yield farming. | Withdrawal terms depend on the selected period. This ranges from flexible to 120 days. Some savings accounts come with limits. After the limit has been reached, a much lower interest rate is offered. |
What We Like
4. OKX DEX – Decentralized Web3 Aggregator With Industry-Leading Yields
OKX is a popular crypto exchange ranked in the top 10 for daily trading volume. The exchange has since launched a decentralized web3 aggregator platform that allows investors to earn interest without going through a third party. As an aggregator, this means that OKX connects to dozens of other exchanges and platforms to source the best yields for its clients. In fact, OKX also has the capacity to support multiple blockchain standards, including Ethereum, BNB Chain, Fantom, and Polygon.
This means that investors can earn interest on thousands of different cryptos. For example, when we searched for Tether, OKX ranks each supported exchange by the APY. OKX informs us that an APY of 9.05% can be earned via AAVE V3. Crucially, there is no requirement to open an account with AAVE V3 or any other supported platform. Instead, all interest-bearing activities go through OKX.
Other popular cryptos with competitive interest rates include USD Coin, BNB, and Dai, currently paying 4.8%, 4.8%, and 3.9% respectively. Another top-rated feature at OKX is that tokens can be swapped instantly and without an intermediary. For example, an investor holding Ethereum might wish to swap the tokens for Ape Coin to earn over 50% in interest. As a decentralized aggregator, investors are not required to provide any personal information or KYC documents. Instead, investors simply need to connect their wallet and choose which coins to earn interest on.
Platform | Interest-Bearing Coins | Interest Rates | Key Terms |
OKX DEX | Thousands of tokens across multiple blockchain standards. Supports dozens of third-party exchanges and platforms via an aggregator tool. | Varies widely depending on the chosen token. Examples include Tether (9.05%), USD Coin (4.08%, and Ape Coin (50.5%). | As an aggregator, terms will depend on the third-party exchange that is offering the interest-bearing product. Investors should check the specific terms before proceeding. |
What We Like
5. Coinbase – Earn Interest on Nearly 120 Cryptos via a User-Friendly Exchange
Coinbase – a user-friendly crypto exchange that is now listed on the NASDAQ, enables users to earn interest on over 120 cryptos. This includes the vast majority of the top 25 cryptos, so diversification can be achieved via one Coinbase account. For example, Ethereum, Cardano, and Solana are currently yielding 3.8%, 2%, and 2.4% respectively. Cosmos, Polkadot, and USD Coin are yielding 6.1%, 14.2%, and 1.5%.
Those looking to earn interest on crypto at even higher APYs will likely be interested in Decimal and DODO. These emerging tokens are currently yielding 109% and 58% respectively. The terms surrounding each interest agreement on Coinbase will vary depending on the token and blockchain network. Coinbase notes that minimum terms range from a few minutes to several weeks. As such, checking the finer details is crucial before proceeding.
There are no issues with safety when opting for Coinbase. In addition to being a public company, Coinbase was founded in 2012 and is now used by over 110 million clients. Many of which are based in the US. There are two options to start earning interest on Coinbase. First, investors can transfer their tokens from a private wallet into their Coinbase account. Alternatively, investors can buy their chosen token on Coinbase with a debit/credit card or bank wire.
Platform | Interest-Bearing Coins | Interest Rates | Key Terms |
Coinbase | 119 tokens, covering a blend of large-cap and emerging cryptos. | Depends on the chosen token. Some small-cap tokens yield an APY of over 100%. | Each token comes with its own terms. Coinbase notes that withdrawal lock-up terms range from a few minutes to several weeks. |
What We Like
How Does Earning Interest on Crypto Work?
Put simply, investing in crypto is no longer just about price appreciation. Instead, investors can now earn interest on their idle crypto tokens across various methods. This includes savings accounts, staking, and yield farming.
In this section, let's explore the most popular ways to earn interest on crypto. This will enable investors to choose the most suitable method for their goals and risk tolerance.
Savings Accounts
Crypto savings accounts work much like certificates of deposits (CDs). In a nutshell, the investor will deposit tokens into a crypto interest account and earn a yield. Savings accounts are usually offered by crypto exchanges, including Crypto.com, OKX, and Binance.
There are various terms associated with crypto savings accounts and this will impact the interest offered. For example, higher rates are usually offered on longer lock-up terms. While lower rates are offered on flexible accounts.
- When opting for a lock-up term (e.g. three months), the crypto tokens cannot be withdrawn until the respective maturity date. This is why interest rates are higher.
- When opting for a flexible term, the crypto tokens can be withdrawn at any time. This is why lower interest rates are offered.
When depositing crypto tokens into a savings account, the platform will often use the funds for third-party loans. This enables the platform to pay interest to the investor. But do remember that people can default on loans, which means savings accounts are not free of risk.
Staking
One of the best ways to earn interest on crypto is via staking. The traditional method of staking consists of crypto tokens being deposited into a blockchain network. The network must use the proof-of-stake consensus mechanism. Examples include Ethereum and Cardano.
When the tokens are locked in the blockchain, they help keep the network safe. In turn, the blockchain will reward stakers for as long as the tokens are locked. This makes staking a less risky option than savings accounts. However, this also means that interest rates are generally lower.
The best place to earn interest on crypto via staking is eToro. This is a heavily regulated platform with several tier-one licenses. eToro does not require investors to opt-in to its staking program, as rewards are automatically generated after 7-10 days.
Cryptoassets are a highly volatile unregulated investment product.
Yield Farming
Another option to consider when learning how to earn interest on Bitcoin is yield farming. This method will see investors lend tokens to a crypto exchange for liquidity purposes. Unlike savings accounts and staking, yield farming requires investors to lend two different tokens.
This is because yield farming provides liquidity for a tradable pair. Moreover, an equal amount of each token must be provided, in terms of the current market value.
For example:
- Suppose an investor wishes to provide liquidity for BTC/USDT
- We’ll say that BTC/USDT is currently trading at $25,000
- If the investor deposits 1 BTC, they also need to add $25,000 worth of USDT via the best yield farming crypto platforms
- This takes the total investment to $50,000
Now, yield farming comes with both pros and cons. On the one hand, yield farming can generate significant returns. However, it is also fraught with risk. In particular, when the value of the two tokens diverts from one another, this can result in impermanent loss.
In simple terms, this means that the investor would have made more had they opted to leave the tokens in a private wallet. Hence, an opportunity cost has arisen.
Is Crypto Interest Worth it?
By leaving crypto tokens in a private wallet or exchange, investors are losing out on an additional revenue source – interest. As such, it makes sense to earn interest on crypto investments to maximize potential returns.
Crucially, this concept is not exclusive to cryptocurrencies. On the contrary, leaving money in a bank account also comes at a cost. After all, the money could be invested elsewhere to maximize long-term growth.
Maximizing Growth
To illustrate the benefits of earning interest on crypto, let's look at an example.
- First, let's say that an investor buys one Bitcoin when it was worth $10,000
- Three years later, Bitcoin is worth $30,000
- This means the investor has made capital gains of $20,000
- Now let's say that the investor deposited their one Bitcoin into a savings account from day one. The savings account paid an average annualized yield of 5%
- We'll say that over the course of three years, Bitcoin averaged a market value of $20,000
- This means in addition to $20,000 in capital gains, the investor made an additional $1,000 each year, or $3,000 in total.
As per the above, the investor made an additional 15% on their investment. In contrast, had the investor kept their one Bitcoin in a private wallet, they would have missed out on these additional gains. Hence, this is an opportunity cost.
Compounding Growth
Another benefit of earning interest on crypto is that it facilitates compound growth.
Put simply, compound growth means the investor immediately reinvests their crypto interest. The interest reinvested will subsequently earn additional interest – amplifying growth over time.
The benefits of compound growth should not be understated, as we highlight in the example below:
- Let's say a $10,000 investment is made in Ethereum
- The investor deposits the Ethereum tokens into a staking pool that pays 10% annually
- At the end of year one, the investor receives $1,000 in staking rewards. The investor reinvests the $1,000 back into the same staking pool.
- At the end of year two, the investor makes $1,100 in staking rewards. This is because they now have $11,000 deposited.
- This will continue each and every year, with the interest earned increasing after each reinvestment.
Now check out the chart below which further supports the above example.
By reinvesting the 10% rewards each year, the original $10,000 is worth almost $26,000 after a decade. Moreover, this doesn't take into account the value of the respective crypto token. Any price appreciation is in addition to the interest earned.
In contrast, by withdrawing the interest each year, the investment remains at $10,000. This is why electing to earn interest on crypto remains a smart investment strategy.
Consider the Risks
Like all investment products, earning interest on crypto isn't without its risks. After all, the interest has to come from somewhere.
For example, we mentioned earlier that crypto savings accounts allow exchanges to offer loans to third parties. In other words, the exchange uses deposited crypto tokens and lends them to other people who pay interest. If a large number of defaults occur, the investor is at risk of losing some or even all of their cryptos.
In the case of yield farming, the overarching risk is impermanent loss. This happens when the value of the two tokens being deposited changes exponentially, resulting in an imbalance of liquidity. In turn, the investor can get back less than they originally invested.
Another risk to consider is that interest-earning products come with lock-up terms. During this period, the tokens cannot be withdrawn. This can be problematic if the token goes through a significant price increase which is short-lived. As the tokens were locked, the investor would have missed out on sizable gains.
How Much Interest Can You Earn on Cryptocurrency?
The amount of interest that can be earned on crypto will depend on many different factors. For example, the best crypto interest rates are usually offered on small and emerging tokens. This is because the tokens are riskier than established cryptos, so platforms will pay higher rates.
At the other end of the scale, large-cap tokens with a trusted reputation will come with the lowest rates. For example, the best Bitcoin interest rate on Crypto.com is just 1.5%. And, to get this rate, the investor must:
- Agree to a three-month lock-up term
- Stake at least $40,000 worth of CRO tokens
Let's say the investor instead wants a flexible savings account on Bitcoin without staking CRO. This will reduce the interest rate to just 0.1%. Crucially, the amount of interest available is determined by the amount of risk undertaken. The more risk that investors are willing to take - the higher the interest rates.
Another option to consider is to earn interest on stablecoins, such as Tether, USD Coin, or Pax Dollar. This will remove the volatility aspect associated with cryptocurrencies, as stablecoins are pegged to a major fiat currency.
Ultimately, investors will need to shop around to find the ideal crypto-interest product. An informed decision will need to be made based on the investor's financial objectives and tolerance for risk.
Crypto Interest vs Staking
The terms 'crypto interest' and 'staking' are often used interchangeably. However, they can refer to different outcomes.
For example, there are many different ways to earn crypto interest - and this includes staking alongside savings accounts and yield farming.
In some circles, crypto interest is exclusively associated with savings accounts. This is because the deposited tokens are lent to others via an exchange. And in turn, the investor is paid interest on the borrowed funds. However, just like staking, savings accounts generate interest in crypto tokens.
The key difference is in how the interest is generated. For instance, staking generates rewards via a proof-of-stake blockchain. This means that the rewards are derived from the blockchain itself, rather than a third party.
Another thing to remember is that both the best crypto interest accounts and staking can come with flexible or fixed terms. In the case of the latter, the tokens cannot be withdrawn until the term has passed.
Crypto Interest Fees
Whether or not crypto interest products attract fees will depend on the chosen platform.
In most cases, the platform will make money in addition to the interest rates it displays. For example, let’s suppose an exchange is offering savings accounts with an APY of 10%. In this instance, the exchange might charge borrowers an APR of 13% – pocketing the 3% difference.
This is also the case with staking. For example, eToro enables investors to keep up to 90% of the staking rewards it generated behind the scenes. This means that eToro will take 10%. While this might seem high, eToro enables investors to withdraw their tokens at any time. This is the case even if the tokens are locked in a staking pool. Moreover, eToro offers 24/7 customer support and a heavily-regulated framework - so its fees are reasonable when factoring in the full package.
Those looking to earn interest on crypto via yield farming will also need to consider fees. For example, the exchange will usually offer a 'share' of trading fees it collects on the pair the investor has provided liquidity for. However, this might only amount to a small percentage of the collected fees. Rarely will exchanges publish a full breakdown of their profit-sharing agreement on yield farming.
Do You Pay Tax on Crypto Interest?
Other than a few very small exceptions, most countries require investors to pay tax on crypto interest. Unlike price appreciation, crypto interest is generally viewed as income. This means tax will be due in the year it is received.
The specific tax implications of crypto interest are complex. Oftentimes, tax authorities require investors to declare crypto interest amounts based on the value when received. Consider that some crypto interest platforms make daily or weekly payments.
This means that every time interest is received, the investor needs to log the value of the token within 24 hours. This figure will then be added to the investor's income for the year. This means that the interest can increase the investor's tax band.
Moreover, the tax will need to be paid even if the original investment is currently at a loss. This is because capital gains and losses are not realized until the crypto tokens are sold.
For further insight, check out our comprehensive guide on how to avoid crypto taxes.
How to Earn Interest on Bitcoin Tutorial?
To conclude this guide, we will explain how to earn interest on crypto in just four simple steps. This tutorial explains the process when using eToro - a regulated platform that supports passive income via staking.
Step 1: Open an eToro Account
First, an account with eToro will need to be opened. This is because of eToro's strong commitment to regulation, investor safety, and anti-money laundering controls.
Visit the eToro website and complete the registration form. Simply provide some personal information and contact details to proceed with the KYC process. Next, upload a copy of a government-issued ID and proof of address. The documents will be verified near-instantly.
Step 2: Make a Deposit
eToro allows investors to earn interest on crypto across three staking coins:
- Ethereum
- Cardano
- Tron
To earn interest, investors will need to purchase one of the above coins. But first, a deposit will need to be made.
eToro requires a minimum deposit of just $10. Payment types accepted include debit/credit cards, e-wallets, and bank wires.
Step 3: Buy an Eligible Staking Coin
Now that the account has been funded, it's time to buy an eligible staking coin. Most investors use the search box by typing in the name of the crypto.
For example, in the image above, we are searching for 'Cardano'. Then we press the 'Trade' button to proceed. This will then load an order box, like in the image below.
Type in the total amount of crypto to buy. In our example, we are buying $500 worth of Cardano.
Click 'Open Trade' to confirm the purchase.
Step 4: Earn Staking Rewards
After the purchase has been made, there is nothing else to do. eToro has a grace period of between 7-10 days, which is when the investment will start earning interest.
After this period, investors can track how much interest they are earning every 24 hours. Interest will be earned for as long as the crypto tokens remain in the eToro account. Investors can withdraw their tokens at any time without penalties.
Conclusion
Earning interest on crypto is a great way to maximize returns. Not only will investors generate passive income but they will still benefit if the crypto increases in value.
To start earning crypto interest today, check out eToro. This regulated platform offers an in-built staking facility that supports Ethereum, Cardano, and Tron.
After 7-10 days of buying the respective token, interest will be generated on a daily basis. Best of all, eToro enables clients to withdraw their tokens at any time - without lock-up periods or fees.
Cryptoassets are a highly volatile unregulated investment product.