3 Ways to Make Your Crypto Assets Work For You

Hardbacon

Guest post

This is a guest post from Hardbacon. Please note: this piece is intended for educational purposes only. It is not financial advice. 

Crypto can be used as a tool to help you achieve your financial goals. Whether you want to establish financial security in your household, contribute to your retirement fund, or simply want to create a different source of income, you can do all of that with crypto. It isn’t uncommon to have double-digit gains through crypto investments but understand that not all strategies are created equal. Let’s take a look at a few ways where you can put your crypto to work.  

Crypto Interest Accounts

Crypto interest accounts work similarly to traditional savings accounts in that you deposit your cryptocurrency then begin to accrue interest. Plenty of crypto interest accounts exist and have attractive APYs (annual percentage yields). Though the differences in interest rates, fees, security, and features set each company apart, there is one commonality between all of them: their interest rates beat high-interest savings accounts. It’s common to see interest rates in the double digits with crypto interest accounts whereas you would be lucky to see a high-interest savings account offer anything beyond 1%.  

Interest Rates 

Some crypto interest accounts, like the ones offered by Blockfi, offer interest rates anywhere from 0.1% to 8.25%. On the upper end of the spectrum, you can find rates as high as 17% APY while on the lower end, 1% to 1.25% APY range for certain companies. This range is considered the bottom and you won’t find many crypto interest accounts dip below this. With high-interest savings accounts, on the other hand, an APY of 0.50% on average is the industry standard. The best we found was from SmartyPig by Sallie Mae at a 0.70% APY.

Fees And Account Minimums

Fees and account minimums are becoming rare to see on high-interest savings accounts and crypto interest accounts are no different. If you do see fees charged in crypto interest accounts, you’ll typically find them when withdrawing. Some high-interest savings accounts will charge fees when withdrawing but it is typically found as a monthly service fee or various handling fees such as with paper statements.  

Investments

Findings from Gemini show that over 14% of Americans own cryptocurrency and a survey from Hardbacon shows that 28% Canadian retail investors own cryptocurrency. Every year the number of cryptocurrency investors increases and for good reason: cryptocurrencies can be great investments to supplement any portfolio.  

High-Risk High Reward

The price of Bitcoin was hovering around $13,000 USD this time last year. Currently, Bitcoin’s price is around $59,000 USD / $72,800 CAD. Earning 5x gains isn’t uncommon when it comes to crypto investing but understand that these gains are due to their highly volatile nature. Trading and investing in crypto is often assumed to be a mixture of speculation and fundamental analysis so keep that in mind.  

Betting On The Future

Corporate, institutional and governmental adoption of cryptocurrencies is becoming the norm. China rolled out their state-issued digital RMB to select cities while the U.S. is playing catchup and are currently researching the viability of a digital dollar. Visa announced that USDC transactions will be supported on their payments network. Countless companies are adopting or accepting cryptos such as PayPal and Tesla. It’s clear that cryptos are here to stay so buying and holding some would be the smart play here. Research the top five or ten cryptocurrencies by market cap to get you started.  

Staking

If you have a decent amount of crypto saved up you could put it to work and earn interest on them. To do so, you’d need to lock up your assets for a set period – and depending on where you park your crypto – you can earn anywhere from 5% to 25% APY. This can be an idea worth exploring especially if you have some crypto and you’re on the fence on whether you want to deposit your money in a high-interest savings account.  

Mechanics

On the surface, staking may seem similar to investing in crypto interest accounts but the difference lies in what happens with your crypto after you deposit it. With crypto interest accounts, you are lending crypto to the company in exchange for a fixed or varying interest rate. Staking works with crypto deposits as well, but in this case, the crypto is used to validate transactions on the blockchain.   

Requirements and Expectations

Not all cryptocurrencies can be staked because not all are based on proof of stake consensus mechanisms.  For example, Bitcoin is based on a proof of work consensus mechanism, and therefore it isn’t possible to be staked.  Ethereum can be staked but the requirements are steep: you’d need 32 ETH to be able to stake on their blockchain and with current market prices hovering around $4,800CAD, this would cost you around $153,600 to get started. Staking pools and centralized exchanges offer a more cost-effective solution where minimums aren’t required so it would be your best to look into them

Let Crypto Work For You

Crypto can work for you just like how money can. It isn’t hard to find strategies that will yield you high rates of return but be careful. Cryptocurrencies are inherently volatile and currently, the best strategies all require due diligence. Professionals agree that allocating only a small portion of your portfolio that you can afford to lose would be the best bet.

Written by: Hardbacon

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