Celsius Network is a leading blockchain-based crypto lending platform, offering its services since 2017. Celsius Network provides various financial services on its crypto lending platform. Most notably, it offers Bitcoin loans at competitive rates. It also has a native cryptocurrency token (CEL). It has been an excellent year for Celsius Network and CEL tokens. As of 2020, the company has raised nearly $100 million of investment funds under its founders Alex Mashinsky and Nuke Goldstein.
Alex Mashinsky, CEO of Celsius Network, says that the company is actively targeting the crypto lending market in the United States. The platform enables investors to earn dividend income through passive interest payments. Ultimately, Celsius Network intends to make Bitcoin loans fungible globally and serve as funds for new businesses.
How Does Earning Interest on Crypto Work?
Celsius Network is an online peer-to-peer lending network specializing in the borrowing and lending of cryptocurrencies. By pledging crypto as collateral, it allows borrowers to access fiat funds faster at minimal interest rates. The primary method Celsius uses to generate revenue is through crypto lending.
A key characteristic of the crypto lending business model is that Celsius uses its customers’ deposited assets as collateral for yield-generating activities, primarily lending them to approved institutional borrowers. Celsius also lends dollars and stablecoins to retail customers who are interested in borrowing against their crypto holdings in addition to lending crypto to approved institutions.
Celsius is a platform that allows access to over 30 different cryptocurrencies for earning and borrowing. The platform enables users to manage their crypto portfolios and compound interest (up to 15% APY) on BTC, ETH and CEL. Since its establishment, Celsius Network has originated over $1 billion in loans. These numbers are proof that low-interest loans are in high demand.
Just as with a savings account, storing cryptocurrency funds in Celsius earns you interest each week on your investments. Among the main features of Celsius Network are:
- Savings accounts for cryptocurrency with interest: provides the option to deposit your cryptocurrencies into a savings account and earn weekly (compound) interest on them
- Loans with crypto as collateral: your crypto assets can be used as collateral to receive a loan in conventional currencies. Putting up cryptocurrency as collateral allows you to take out cash (or stablecoin) loans with a range of different terms. In contrast to most traditional loan services, Celsius loans do not require a credit check, and approval can typically occur within minutes.
Bitcoin Interest Rates: 6.2% Interest on BTC
The Celsius Network and BlockFi are the 2 most reputable platforms that provide cryptocurrency interest accounts. Since Celsius and BlockFi hold your digital assets, they are both centralized companies that use decentralized assets. Thus, they are referred to as centralized finance (CeFi). The Celsius rewards rate is expressed as Average Percentage Yield (APY). In its calculations, it uses weekly compounding, since reward interest is paid out every week and therefore compounded every week.
Nevertheless, you cannot use APY when calculating your weekly earnings. For Celsius users, it is necessary to use the Average Percentage Rate (APR) to calculate their exact weekly rewards.
Here are some interest rates on each platform:
BlockFi: 4.5% on 0 to 0.1 BTC, 1% between 0.1 to 0.35 BTC and 0.1% on any amount over 0.35 BTC
Celsius: 6.2% for the first BTC and then 3.51% for any amount over 1 BTC
Ethereum Interest Rates: 6% Interest on ETH
Buying and holding Ethereum and waiting until the price goes up is an excellent option for turning a profit. Another option to add a second revenue stream is to earn interest by lending out your Ethereum. Nexo, like Celsius, is another platform that enables users to put their idle ETH to work and create a source of passive income. The way Nexo calculates interest is to credit your account daily by using the following equation:
Daily interest = Principal amount (in original cryptocurrency) x (APY/365)
Let’s compare the interest rates for Ethereum on each platform:
Nexo: 6% on ETH with no limit
Celsius: 5.35% for the first 100 ETH and then 5.05% for any amount over 100 ETH
How to Earn Interest With Celsius
With more than 40 crypto assets accepted, including Bitcoin, Ethereum and stablecoins such as USDC, Celsius Network offers users in over 140 countries the ability to earn interest on their crypto assets. In the Celsius app, interest is paid weekly and compounded.
Step 1: Open an online account.
Start by visiting the Celsius Network signup page or downloading the app for your device directly from the Celsius website. Your username, email address and password will be required. In most cases, lending platforms need you to complete a KYC process (Know Your Customer) by verifying your personal information and providing proof of identity. To deposit funds into your account, you need to use either crypto or a bank account. Once you deposit the funds into your account, you can begin earning interest. The Celsius Network’s easy-to-use interface allows users over the age of 18 to create an account.
Step 2: Purchase cryptocurrency.
Buying crypto is simple using a credit card with the best rates in the market. With the Celsius app, you can purchase crypto in a wide variety of currencies, including USD, EUR, GBP and 16 other fiat currencies. Furthermore, users can buy 7 leading cryptocurrency coins, including BTC, ETH and XRP.
Once you have entered the amount of crypto you wish to purchase, the Celsius app will display the appropriate fiat conversion amount as of the time of purchase. Select the Buy Coins button when you are ready to buy. Check your transaction details thoroughly and click on Confirm & Buy to complete the crypto purchase.
Step 3: Earn interest on your crypto.
Choose the coin you wish to deposit. You then receive an address to which you can send your coins or tokens. Make sure that your deposit goes to the address provided and that it is in the correct currency. Allow a few seconds or minutes for your deposit to be completed. Hold your coins in your wallet to earn up to 9.9% APY paid out weekly or get a USD or stablecoin loan at as low as 3.46% APR. When you store crypto on Celsius, you receive weekly payments with compound interest. Celsius doesn’t require a minimum balance.
You may earn interest in kind or in CEL. Therefore, if you lend ETH, you can earn ETH. If you lend Ethereum and earn CEL, you can earn up to 25% more interest.
Other Ways To Earn Interest on ETH and BTC
Yield farming is another method of earning passive interest on your crypto, also known as decentralized finance (DeFi). To earn passive income through this system, you first become a liquidity provider (LP) on a decentralized exchange (DEX) exchange such as Uniswap, Aave or PancakeSwap. As a result, LPs receive a proportion of the pool’s trading fees.
The DEX issues LP tokens representing your share of the funds locked in the liquidity pool upon depositing liquidity. You can stake the LP tokens using supported decentralized lending platforms to earn additional interest. It is possible to make 2 different interest rates from one deposit utilizing this strategy.
Alternatively, you can deposit your preferred crypto into Crypto.com, and its Crypto Earn program, which operates similar to a savings account for crypto. Crypto Earn offers an impressive interest rate (up to 18%) that accumulates daily to allow your crypto assets to grow. The holding term options include flexible, 1 month and 3 months. The interest rate for both Ethereum and Bitcoin is 6.5% APR. The Gemini trading platform offers a Gemini Earn Account that provides cryptocurrency interest. BTC and ETH users may earn 2.05% APY, while DAI and GUSD holders can earn up to 7.40%.
Risks of Earning Interest on Crypto
Cryptocurrency, a form of digital currency, is innately volatile and thus possesses a risk that prices could fluctuate wildly. CEL tokens are cryptocurrencies. Unlike money deposited in a savings account in a bank, digital currency is not legal tender and is not backed by any government. Two types of governmental protection exist for consumer funds: the Federal Deposit Insurance Corporation (FDIC) protects against loss of your insured deposits if the bank fails; and the Securities Investor Protection Corporation (SIPC) protects against the loss of cash and securities held at a financially-troubled brokerage firm although not against a decline in value of your securities.
Entities offering crypto interest are not subject to FDIC, SIPC or other similar protections. It is not a risk-free product, and, unlike money in a bank account or Certificate of Deposit, loss of principal is possible. If cryptocurrency prices fall or a security breach occurs, profits made from earning interest could be wiped out. Therefore, don’t invest more in interest accounts than you can afford to lose.
Is Earning Interest on Cryptocurrency Worth It?
The high rate of return on your cryptocurrency is one of the most significant advantages of earning interest. The typical interest rate on traditional savings accounts is meager, around 0.5%, and a far cry from the 5% to 17% offered in crypto. Along with interest you earn, you also benefit from the appreciation of your crypto assets. Furthermore, Celsius offers no minimum lock-up periods, so you can withdraw your funds at any time.
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