Earn Interest with Bitcoin: How to Do It in 2024

• Harsh Agrawal
• February 29, 2024

Summary

• Bitcoin’s recent volatility indicates market fluctuations, prompting interest in alternative methods of earning from appreciating assets like Bitcoin.
• Passive income through HODLing Bitcoin is possible via efficient lending markets utilizing Blockchain technology.
• Platforms like BlockFi offer interest-bearing cryptocurrency accounts, providing a simple way for beginners to earn passive income.
• Understanding how interest works in the crypto world is crucial before lending Bitcoin.
• Cryptocurrency interest-earning accounts operate similarly to traditional savings accounts but with higher interest rates.
• Steps to start earning interest on Bitcoin involve opening a crypto account, comparing interest rates, adding Bitcoin to your portfolio, and earning interest immediately.
• Compound interest accelerates investment growth, but it’s essential to compare rates before lending Bitcoin.
• Staking Bitcoin supports Blockchain networks and offers rewards, with Proof of Stake being more environmentally friendly.
• Yield farming is gaining traction, allowing investors to earn passive income by depositing crypto coins into lending protocols.
• Top platforms for earning interest on Bitcoin in 2024 include Nexo, Atomic Finance, ZenGo, Binance, Yield App, CoinLoan, Celsius Network, Crypto.com, Coinrabbit, and Smart.Fi, each offering varying APY rates and features.

Bitcoin’s recent performance is a tell-a-tell sign of market volatility. If you seek more sustainable methods of earning interest on appreciating assets, then there is a way to make money by merely HODLing the Bitcoin. It is because Bitcoin and other cryptocurrencies have built more efficient lending markets that process loans using Blockchain technology. Earning interest in Bitcoin provides passive income and compounds your earnings if the cryptocurrencies continue to grow.

While there are several ways to generate income on your digital assets, to begin with, you may use a centralized platform that allows you to earn interest on your Bitcoin holdings via an interest-bearing cryptocurrency account such as on BlockFi. Check out their lending calculator to gauge the interest on Bitcoin. 

And then, you have centralized interest-bearing crypto accounts that offer a simple method for novices to generate passive income from their Bitcoin, depending on the cryptocurrency you pick. 

BlockFi, Celsius, and Crypto.com are three of the finest centralized alternatives for earning interest on your cryptocurrency available right now. Before you decide on lending your hard-earned Bitcoin, let us decode how the interest works in the crypto world.

How Does a Cryptocurrency Interest-Earning Account Work?

A cryptocurrency interest-bearing is no different than your traditional savings bank account. The first step requires you to buy bitcoins from UK websites or head to your local P2P Bitcoin exchange and invest in BTC. And then, deposit that BTC without any lockup period or deposit restrictions in any one of the crypto lending sites.

Once done, you will start receiving compound interest on Bitcoin — allowing you to accept payments and withdraw money at any moment.

How does the Interest Calculation work?

Interest is calculated based on market conditions and is paid in the same cryptocurrency as the investment. Additionally, there is a withdrawal charge that changes regularly to reflect the state of the Blockchain.

It’s worth mentioning that interest rates in cryptocurrency marketplaces are incomparable to those in conventional markets. Consider the situation as a risk-reward trade-off. Crypto interest-earning account providers can offer you yearly interest rates on your cryptocurrencies. All deposits receive the best interest rate immediately, and the interest is compounded each month.

Step-by-Step Guide to Start Earning Interest

Earning interest on Bitcoin involves using cryptocurrency lending platforms that offer savings accounts or staking pools. Here’s a simplified guide based on the information from the sources:

Step 1: Open a Crypto Account

To start, you need a crypto account on a platform that allows you to earn interest on Bitcoin. These platforms lend your Bitcoin to others and secure loans with crypto collateral. Popular options include Flynt Finance, Uphold, and Nexo.io, with Flynt offering high APYs through strategies like Bitcoin covered calls​​.

Step 2: Compare Interest Rates

Interest rates vary by platform, generally ranging from 3% to 8% annually for Bitcoin. Rates can be floating, changing with market demand, so it’s wise to keep an eye on the rates to ensure you’re getting the best return​​.

Step 3: Add Bitcoin to Your Portfolio

You can buy Bitcoin directly on some platforms or deposit it if you already own it. If you don’t have Bitcoin, purchasing it through exchanges like eToro or Coinbase is straightforward. Another option is using Wrapped Bitcoin (WBTC) on Ethereum’s Blockchain, which can earn interest on platforms like Compound or Aave​​.

Step 4: Earn Interest

After depositing Bitcoin into an interest-bearing account, you’ll start earning interest immediately. The interest rate depends on the platform and how much Bitcoin you deposit. With rates generally between 3% and 10%, keeping your funds in the account long-term can significantly increase your Bitcoin holdings​​.

Compound Interest

Savings accounts can offer either simple or compound interest. Compound interest, which adds interest to your principal and previously earned interest, can accelerate the growth of your investment. The frequency of compounding can affect how much interest you earn, with shorter intervals leading to more significant gains​​.

Compare Interests Before Lending the BTC 

You can visit the platform’s website and find out the interest rates on Bitcoin (and many other coins). The interest rate you receive may differ, even if you invest with the same cryptocurrency, depending on whether the business takes a cut of the income. Therefore, make sure you also factor in the transaction charges before lending your BTC on any platform.

Typically, these cryptocurrency savings accounts’ interest rates are variable because crypto loans constantly fluctuate in response to supply and demand. Many investors and cryptocurrency exchanges that provide leverage often request cryptocurrency loans.

You can expect a fair interest rate for a stablecoin. Though, a few cryptocurrency interest rates may rise significantly higher. These high interest rates, however, should be treated as significant crypto inflation and highly leveraged holdings. For anyone new to accruing interest in cryptocurrencies, you should be wary of any rate of more than 25%. 

Therefore, research well and read this piece to get familiar with the known names in the crypto lending market.

Staking

Staking is involved in holding your BTC to support the Blockchain network and confirm transactions. In return, you earn a percentage-rate reward as Blockchain puts those coins to work. This is also a way to become a significant part of the network security infrastructure, which, in turn, adds profit!

Now, there are two types of staking;

• Proof of Work (PoW): An old method proposed by Satoshi Nakamoto (the supposed inventor of Bitcoin) in Bitcoin’s first whitepaper. Implementing this approach would be extremely costly in terms of energy, mining infrastructure, and impact on the environment. It would have limited scalability due to its sluggish transaction processing capacity, requiring the creation of a viable substitute – Proof of Stake.

• Proof of Stake (PoS): It functions similarly to the Proof of Work but in a rather environment-friendly manner. The staker demonstrates their support for a cryptocurrency by generating a block of that currency on the Blockchain. Each time a new block is uploaded to the Blockchain, new Bitcoin coins are created and given to the block’s validator as staking rewards. The payouts are often in the same cryptocurrency as the one staked. Ethereum offered up to 5% APR on each ETH 2.0 that users stake as a reward for assisting with network security via Proof of Stake.

Yield Farming 

It is a relatively new concept of stacking that is already gaining traction on many diverse lending platforms. The term “yield farming” refers to a process in which cryptocurrency lenders earn rewards for depositing units of crypto coins into a lending protocol which is a smart contract-based liquidity pool. It is an investor’s pursuit to earn passive income on crypto-assets where rewards accrue in the form of interest from trading fees. 

For this, Compound Labs has created one of the largest Defi lending platforms, allowing you to borrow and lend any Bitcoin on an ad-hoc basis at algorithmically set rates.

A typical yield farmer continuously shuffles crypto assets between pools on the compound, offering the maximum Annual Percentage Yield (APY). Crypto yield farming provides double returns if you put stablecoins in a digital account. An APY on your initial deposits is the first income. And later, certain protocols provide a new token on top of the yield that you can charge the borrower as an extra subsidy.

Top Platforms for Earning Interest on Bitcoin in 2024

Earning interest on Bitcoin has become a popular way for investors to generate passive income. Here’s a breakdown of the top platforms for doing so in 2024:

• Nexo: Known for its high interest rates, Nexo offers up to 16% APY with daily payouts. It’s a highly regulated platform, available in over 200 jurisdictions, and provides a $375 million insurance on crypto assets​​.
• Atomic Finance: This platform is designed specifically for Bitcoiners, offering up to 8% APY on Bitcoin. It supports on-chain verification and focuses on transparent and verifiable operations​​.
• ZenGo: Offers a user-friendly experience with an APY of 4% for Bitcoin, extending up to 8% on stablecoins. It supports a wide range of payment options and is accessible in 188 countries​​.
• Binance: As the world’s largest crypto exchange, Binance offers an APY of up to 30% on various cryptocurrencies, including Bitcoin, with its Binance Savings account​​.
• Yield App: This platform offers up to 7% APY on Bitcoin, focusing on security, user-friendliness, and effective market strategies without engaging in risky lending and asset lending​​.
• CoinLoan: Offers a 7.2% interest rate on Bitcoin and supports over 20 assets for its interest account. It provides a comprehensive platform for earning, borrowing, and trading​​.
• Celsius Network: Provides up to 6.5% yearly interest on Bitcoin. It’s designed to disrupt traditional financial institutions by offering digital financial services and perks​​.
• Crypto.com: Offers rates up to 8.5% on Bitcoin, with reward payments made weekly in USDC. The platform supports over 25 cryptocurrencies as collateral​​.
• Coinrabbit: Stands out for charging zero fees for its services, making it an attractive option for those looking to maximize returns​​.
• Smart.Fi: This platform combines cryptocurrency benefits with monetary policies, creating an open-lending platform that allows users to earn, trade, lend, and borrow all in one place​​.

Strategies for Maximizing Your Returns

• Loyalty Tiers: Platforms like Nexo offer higher APYs for users who hold a certain percentage of their portfolio in the platform’s native tokens. For example, Nexo’s loyalty tiers can increase your Bitcoin APY to as high as 7% if you choose to receive interest payouts in NEXO tokens​​.
• Diversify Across Platforms: To maximize returns, consider spreading your Bitcoin across multiple platforms. This strategy can help you capitalize on the best rates and features offered by different services.
• Opt for Platforms with Daily Payouts: Platforms that offer daily interest payouts, such as Nexo, allow your earnings to compound more quickly, enhancing the growth of your investment over time​​.
• Understand Platform Risks: Higher returns often come with higher risks. Ensure you understand the terms of service, especially regarding the platform’s security measures and the insurance coverage for your assets​​​​.
• Stay Informed: Interest rates and platform features can change. Regularly review your investment strategy and stay updated on the latest offerings from each platform to ensure you’re always earning the highest possible returns.

Wrapping Up

Getting paid interest on your Bitcoin investment is an excellent method to increase the value of your investment. Numerous platforms allow you to withdraw your balance at any moment, making it very simple to liquidate your Bitcoin holdings if necessary.

Certain businesses require that you store your cryptocurrency in a savings account for a certain period. This increases your exposure to the cryptocurrency market’s risk of price volatility. While you would receive interest, the value of the investment would decrease if the cryptocurrency’s value decreased.

Earning interest in Bitcoin has several advantages, including high-interest rates. While most conventional savings accounts pay less than 2.5% yearly interest, most Bitcoin savings accounts pay at least five times that rate. And because payments are made in Bitcoin, your interest will increase in value over time.

Frequently Asked Questions

How can I start earning interest on my Bitcoin?

• Open a crypto account on a platform that offers interest-bearing accounts.
• Deposit your Bitcoin into the account without any lockup period.
• Start earning compound interest immediately on your Bitcoin holdings.

What platforms can I use to earn interest on Bitcoin?

• Popular platforms include BlockFi, Celsius, Crypto.com, Nexo, and Atomic Finance.
• Each platform offers different interest rates and features, so compare before choosing.
• Consider factors like security, user-friendliness, and regulatory compliance when selecting a platform.

What is the average interest rate for earning interest on Bitcoin?

• Interest rates vary by platform and can range from 3% to 16% APY.
• Rates may fluctuate based on market conditions and platform policies.
• Some platforms offer loyalty tiers or bonuses for holding native tokens, increasing your potential earnings.

Are there risks associated with earning interest on Bitcoin?

• Higher returns often come with higher risks, including market volatility and platform security.
• Understand the terms of service and the insurance coverage provided by the platform.
• Stay informed about changes in interest rates and platform features to mitigate risks and maximize returns.