Cryptocurrency industry is providing its users and investors with financial instruments to earn passive income by keeping their cryptocurrency over a number of years, as stated by Cointelegraph.
According to Cointelegraph, cryptocurrency savings accounts give retail investors the facility to accrue their funds by earning interest on cryptocurrency assets they deposit on specific cryptocurrency platforms, if there is agreement to lend out coins or tokens. Cryptocurrency interest accounts are considered appealing due to their distribution of much higher returns in comparison to traditional bank savings accounts, considering that average interest rate by a cryptocurrency savings account can go up to 7.5% against the average 0.06% of bank savings accounts. Difference in rates between cryptocurrency and traditional savings accounts can come with higher risks related to the service.
Information from Cointelegraph stated that once cryptocurrency assets get deposited into a savings account, an individual starts earning interest from the first day. Cryptocurrencies such as Bitcoin (BTC), Ether (ETH) and Litecoin (LTC), while many favor interest rates on stablecoins like Tether (USDT), USD Coin (USDC) and Pax Dollar (USDP), can be used in a cryptocurrency savings account. Through this process, one grants the platform the right to use that money for any reason, with the focus being on lending to earn high returns. Cryptocurrency savings accounts are expected to provide favorable returns if one agrees to lock up their cryptocurrency for a while or holds a platform-specific token. For example, Nexo increases interest rates bu up to four percent if holders of the platform avail their governance token.
Moreover, Cointelegraph noted that to invest in a cryptocurrency savings plan, a user needs to select the cryptocurrency platform which offers realistic interest rates. Then, along with transferring cryptocurrency to the chosen platform, the user needs to deposit their asset for a limited or flexible period of time to start earning interest from the first day.
(With insights from Cointelegraph)
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