For investors in Bitcoin, Ethereum and the dozens of ICO and DeFi cryptocurrencies, there are four main categories of opportunity to earn interest on cryptocurrency held for long periods of time. We will explore these four approaches to yield-seeking by investors and link to the most popular options currently available in the emerging cryptocurrency marketplace.

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Now that we’ve got that bit out of the way, let’s take a look at:

4 Ways to Earn Interest on Your Crypto

1. Fixed Interest Rates on Cryptocurrency Investment Platforms
2. Lending on Cryptocurrency Exchanges that Pay Variable Interest Rates
3. Decentralized Finance (DeFi) Lending for Cryptocurrency
4. Lending Bitcoin With Lock-Up Periods to Trading Desks for Algorithmic Trading

I’ve listed the above methods of earning interest on your cryptocurrency in order of what I would personally consider least risky to most risky. Of course, all of these methods are far more risky than holding US dollars in an FDIC insured bank account. However, with inflation and the growing risk of US dollar devaluation, investors around the world are seeking better yields in the cryptocurrency space in exchange with a bit more risk.

1. Fixed Interest Rates on Cryptocurrency Investment Platforms

All of these platforms carry what is called counter-party risk. In other words, you are giving up the control of your cryptocurrency keys in exchange for collecting interest on that crypto. In addition there are subtle nuances among the dozen or so cryptocurrency investment platforms or ‘Savings Account’ providers (if you will). Here are the most common variables:

• Interest Rate Boost if you hold a specific amount of the platform’s own cryptocurrency. For example, at the time of this writing, Voyager pays 8.5% interest on USDC, but if you hold a minimum of 5,000 $VGX tokens, that bumps up to a very competitive 9.5% APR.
• Withdrawal limits, lock-up periods and fees.
• Frequency of interest payments.
• Compounding interest vs not compounding interest.

With some of those variables in mind, here are the Cryptocurrency Investment Platforms I’ve used successfully and have spread my cryptocurrencies across to reduce the risk of having ‘all my eggs in one basket’.

CoinLoan Lending Platform

CoinLoan is a crypto lending platform based in Estonia in Europe. If you aren’t familiar with that country, it is a Northern European country with one of the best regulatory frameworks for crypto.

The platform went live in 2018 and by 2020, they released their excellent iOS and Android apps. As with many crypto related startups, you can learn more about their humble beginnings on the BitcoinTalk Forum. With a 12.3% APY on USDC and a 7.2% APY on Bitcoin, they are one of the best platforms for earning interest on your crypto.

BlockFi

BlockFi is a cryptocurrency custodial platform based out of Jersey City, New Jersey in the USA. They were founded in 2017. According to their website, they are able to pay interest on the crypto you loan them by lending to trusted institutional and corporate borrowers. Their approach to risk-management sets a good standard for the industry, yet isn’t FDIC insured.

BlockFi client funds are structured to be at the top of the capital stack, senior to BlockFi equity and BlockFi employee capital. This means BlockFi’s business and client incentives are aligned and BlockFi would take a loss before any client would. BlockFi implements very thoughtful risk management practices and technology to mitigate the risk, but you should not view the BlockFi Interest Account as a savings account or brokerage account with FDIC or SIPC insurance.

— BlockFi Website

At the time of this writing, BlockFi pays 6% APR on Bitcoin, 8.6% APR on USDC, and varying interest rates on other major cryptocurrencies.

Voyager Invest

Voyager Invest is a mobile-first cryptocurrency brokerage that I view as “the Robinhood of cryptocurrency”. If you use that link and purchase $100 or more of crypto, they will pay you a sign-up bonus of $25 worth of Bitcoin. They have a very intuitive app for both Android and iOS that lets you buy and sell dozens of cryptocurrencies ‘fee-free. I put that in quotes, because they make money on the bid and ask spread.

Voyager pays an additional 1% interest above the rates listed on their websites if you HODL a minimum of 5,000 Voyager tokens ($VGX) in your portfolio alongside your other crypto or stablecoins. I like their integrated profit-and-loss calculation which makes it easy to see at a glance if your purchases of various cryptos were well-timed, or not.

This cryptocurrency brokerage is a Canadian company, but operates primarily in the US consumer market with expansion plans in Canada, Europe and other areas of the world. It trades as VYGR on the Canadian Securities Exchange and over-the-counter here in the US under the VYGVG ticker. As a public company, they go through a rigorous annual audit process which might give you a bit more peace keeping your digital assets on their platform. Voyager’s CEO Steve Ehrlich has a long history in the financial services industry and once worked for the early electronic brokerage e-Trade. The rest of the leadership team have a similar solid industry track-record.

LEDN Lending Platform

LEDN.io is a crypto lending platform based out of Toronto, Canada. If you click that link and sign up, we each will receive $25 in free crypto. They offer competitive interest rates for crypto investors as well as crypto-backed loans. They are one of the few digital asset lending companies to complete a Proof-of-Reserves attestation with a law firm. This helps cement the fact they are a legitimate and trustworthy company for you to loan your crypto to.

The sign-up experience is mostly painless, though they take KYC seriously with a complete facial recognition tool in addition to the usual Driver’s License or passport requirement.

Some of their limitations and policies include:

• Withdrawals of up to 1,000,000 USDC every 7 days and up to 100 BTC every 7 days.
• Unique B2X Bitcoin-backed loan that allows you to “double” your Bitcoin holdings by way of a loan
• Minimal fees for withdrawals to pay network fees
• Only 2 currencies at the moment: Bitcoin and USDC

Here is what their lending rates are at the time of writing this aritcle:

2. Lending on Exchanges that Pay Variable Interest Rates

By far one of the best cryptocurrency exchanges is FTX. This exchange, and many others like it, allow you to lend your cryptocurrency for brief lock-up periods as low as one hour. They pay a variable APR based on supply and demand of traders who borrow your crypto to make trades on the platform. Risk is all managed by the exchange’s trading engine and is very secure compared to some of the early cryptocurrency exchanges. However, like all the other platforms mentioned in this article, none of your funds are FDIC insured or guaranteed beyond the platform’s reputability.

Here is a screenshot of the interest rates bein offered to holders of a variety of cryptocurrencies, tokenized stocks, and stablecoins on the FTX cryptocurrency exchange.

3. Decentralized Finance (DeFi) Lending for Cryptocurrency

In the world of decentralized finance, or DeFi, you can lend out your cryptocurrency through smart contracts and earn interest. These are a bit more complex to wield effectively, than simply depositing your dough on a centralized exchange. However, the interest rates are often very competitive if you are comfortable with lending your crypto out with no third-party intermediary apart from the smart contract software.

Some of the DeFi lending smart contracts include Compound, Yearn, Aave, and Curve. You can find a list of the current variable interest rates on LoanScan.io.

4. Lending Bitcoin With Lock-Up Periods to Trading Desks for Algorithmic Trading

This seems theoretically to be the riskiest option, and not one I would readily pursue. However, the right trading desks have proven algorithmic trading systems that manage risk well and have proper back-testing. Most require you to commit to a ‘lock-up’ period of six months to a year which for me is a big draw-back as well. Interest rates are often higher at around 10-12% as well.