Crypto Interest Accounts: What Are They, and What Are the Risks?
There Are Numerous Ways to Invest in Crypto and DeFi - Here’s a Brief Rundown of One Way that is Currently Getting a Lot of Attention
The financial opportunities made possible by decentralized finance (DeFi) and cryptocurrency are already robust despite their relative infancy. But with the first Bitcoin mined just twelve years ago, the world of DeFi is new territory for everyone, and benefiting from its investment opportunities takes understanding. As always, we at Coinsquad want to help the everyday investor understand the products that are changing the face of finance.
First On Our List – The Crypto Interest Account
What is a Crypto Interest Account?
Crypto interest accounts are getting a lot of attention these days because as alternatives to a regular savings account, their annual percentage yields (APY) are way above those offered by traditional banks.
Take Celsius for example. Celsius is a wallet that pays interest when you store your currency with them. The APY rate varies depending on the currency, but all rates are far higher than what can be obtained in a traditional savings account. As of this writing, according to its website, Celsius offers annual percentage yields upwards of 17% depending on the currency and the amount.
The Celsius website states that, currently, you can get up to 6.35% when you store your Ethereum tokens with them, and their interest calculator indicates that with a $1,000 investment of Ethereum tokens, you stand to earn $50.51 in one year at an APY rate of 5.05%. If you store Bitcoin, you can earn up to 6.20% APY. You can earn returns in the same currency that you store (Bitcoin investment, Bitcoin rewards), or you can get higher return rates if you choose to take them in the form of Celsius’s own token, CEL.
What Kind of APY Can You Get with a Traditional Savings Account?
In comparison, traditional savings accounts offer dramatically lower APY’s. Bankrate.com’s list of highest yield online savings accounts for March, 2021 lists the highest APY at just .60%. For a $1,000 investment, you’re looking at around $6 after one year. With APY rates so low at traditional banks, storing funds in a return-bearing crypto wallet looks pretty enticing.
Interest Bearing Wallets Can Offer Big Returns, But There Are Risks
The risks associated with crypto interest accounts are real, so it’s important to consider them when making decisions about where to put your money. Celsius’s risk disclosure statement outlines a number of potential pitfalls. For one thing, cryptocurrency accounts are not insured, which means if the company behind your wallet goes bankrupt, you have no recourse. Secondly, this is a mostly unregulated space, which means there isn’t much government oversight, and where there is, it is largely to deter terrorism and international money laundering. Additionally, there are risks based on foreign company ownership and risks associated with tax liability, among others. In short, while there is opportunity for outsized gains, it would definitely be a good idea to read the fine print and thoroughly understand the risk before making decisions.
Looking to Place Some Money in a Crypto Interest Account, But Don’t Know Where to Start? You’ve Come to the Right Place.
Whether you’re confused about how to move currency from one wallet to another, or you need someone to help you set up initial accounts, the team at Coinsquad is ready to help! We know the ins and outs of how to set up an exchange account or wallet and how to move currency from one wallet to another, and our Intro-to-Crypto Starter Package makes it so easy!
The Intro-to-Crypto Starter Package
- Cryptocurrency Exchange Account Set Up
- Hot or Cold Wallet Set Up
- :15 Minute Screen-Share Tutorial on How to Buy and Sell Cryptocurrency
This package is designed to get you set up with everything you need to begin investing in cryptocurrency. Call 1-877-295-4008 to get the details!
Even if you’re not ready to invest yet, it pays to be prepared to make a move when the time is right by having your wallet and exchange set up and waiting.