fbpx

How to Earn Interest on Bitcoin

Share to Linkedin Share to Twitter Share to Facebook Share to Print More
Benzinga Money is a reader-supported publication. We may earn a commission when you click on links in this article. Learn more.

Most traditional savings accounts earn less than a 1% annual interest rate, and after accounting for inflation, this money is actually losing value. Investors are looking for better ways to earn interest on appreciating assets, and Bitcoin and other cryptocurrencies have developed  more efficient lending markets that utilize blockchain technology to process loans.

Learn how you can start earning interest on Bitcoin now.

Step 1: Open a crypto account.

The most common way to earn interest on Bitcoin is through a savings account with a cryptocurrency lending platform. These platforms lend bitcoin to institutional and retail investors and make investors collateralize their loans with cryptocurrency in case they default. 

Some popular crypto accounts that let you earn interest on Bitcoin are BlockFi, Celsius and Nexo.io. Nexo.io offers the highest interest rate at 8% APY.

Alternatively, you can use Bitcoin on Ethereum’s blockchain – Wrapped Bitcoin (WBTC). You can earn interest on Wrapped Bitcoin using many services on Ethereum’s blockchain, and you don’t even need to make an account to get started. Once you connect your Ethereum wallet to a decentralized platform like Compound or Aave, you can start earning interest on your Wrapped Bitcoin. 

For beginners, cryptocurrency lending platforms are the easiest way to earn interest on your crypto. All you need to do is sign up for an account, and once you’ve funded your account, you can start earning interest. Most of these accounts don’t have minimum lockup times, so you can pull out your Bitcoin at any time.

Best For
No or Low Fees
Overall Rating
get started securely through BlockFi’s website
Best For
No or Low Fees
N/A
1 Minute Review

Maybe you think cryptocurrency is the future, or perhaps you were swept up in the initial waves of Bitcoin. BlockFi may be your next step if you’re ready to evolve as a crypto investor.

Whether you’re a native crypto user or curious enough to start investing, BlockFi seeks to bring institutional-grade financial products to crypto markets that often face restricted access. It strives to bring clients low-cost, simple applications designed to maximize the potential of crypto assets. Learn more in our BlockFi review.

Best For
  • Crypto native clients. You own Bitcoin now. You’re the friend who fills in the blanks when conversation turns to cryptocurrency, and you devour crypto literacy content like it’s your job (and maybe it is). BlockFi’s platform can help take your crypto assets to the next level.
  • Crypto fringe clients. If you’ve dabbled in buying alternative assets like crypto or know enough to be interested, BlockFi can help you take the next step.
  • Crypto curious clients. If you’re both intrigued by bitcoin and the type of person who obsessively learns everything you can about things you’re new to, BlockFi’s crypto asset platform might be the entry point you’re looking for.
Pros
  • Mostly fee-free platform
  • Market-best interest rates
  • Earn interest, trade and borrow from a centralized hub using the BlockFi app
Cons
  • Mostly restricted to those with a base knowledge of cryptocurrency
  • No dedicated relationship with an investment advisor, so best for those who have a solid handle on crypto trading
Best For
crypto loans
Overall Rating
get started securely through Celcius Crypto’s website
Best For
crypto loans
N/A
1 Minute Review

Celsius Network is a platform that allows you to buy, borrow and pay in more than 30 cryptocurrencies. It’s less a trading platform and more of a means for passive investors to earn weekly returns on their investment. 

From a user perspective, it acts as something in-between a savings account and an investment portfolio. By definition, it’s an investment portfolio because you’re investing in cryptocurrencies. 

The risk that usually comes with trading crypto is much lower, however, thanks to Celsius’ unique business model. All deposits are insured up to $100 million and there are no withdrawal limitations, fees or lockup periods so you can cash out whenever you need to, as soon as you need to. 

Overall, Celsius Network offers a lower risk, less complicated way for both beginners and HODLers to buy and hold crypto while earning steady returns on their investments.

Best For
  • Passive investors
  • Crypto traders
  • Beginners
Pros
  • Rewards of up to 15% APY paid out weekly
  • Easy-to-use mobile platform
  • Available in over 100 countries
  • Instant, fee-free payments using CelPay
  • Great loyalty program
Cons
  • Minimal educational resources
  • Limited to cryptocurrencies

Step 2: Look at interest rates.

Depending on the platform you use, the interest rate you’ll receive in your Bitcoin savings account will vary. Most platforms let you earn between 3% to 8% annual interest rate on Bitcoin, but some platforms like BlockFi have tiered interest rates depending on how much Bitcoin you deposit. 

For example, you’ll earn 6% interest on up to 2.5 bitcoin, but you’ll only earn 3% interest on a deposit over 2.5 bitcoin. There’s no minimum amount to start earning interest on your bitcoin, and you can deposit as much as you want into your BlockFi account.

Most of these interest rates are floating rates, meaning they change with market supply and demand. Most interest rates don’t fluctuate all that much, but there can be fluctuations in rates from time to time. It’s a good idea to monitor the interest you’re earning to make sure you’re earning the highest interest rate possible.

Step 3: Add Bitcoin to your portfolio. 

Some cryptocurrency lending platforms like BlockFi let you directly buy cryptocurrency via wire transfer from your bank. To do this, you’ll need to add your bank account number and routing number to your account. Once you’ve added your banking information, you can buy bitcoin and start earning interest.

Other platforms, like Nexo.io only let you deposit cryptocurrencies on its platform. If you don’t already own bitcoin, you’ll need to make an account with a cryptocurrency exchange. 

Some easy to use exchanges that you can buy bitcoin with a bank account are eToro and Coinbase. These exchanges have mobile apps that make it easy to manage your crypto on-the-go.

If you choose to earn interest on Wrapped Bitcoin, you can buy WBTC on Coinbase and send it to your Ethereum wallet of choice. Good software wallets to use for Ethereum are Coinbase Wallet and Metamask, as they’re easy to use with decentralized applications. 

Once your WBTC is deposited into your Ethereum Wallet, all you need to do is connect your wallet to a program like Compound or Aave to start earning interest on your Wrapped Bitcoin.

Step 4: Earn interest.

Once you’ve deposited your funds into an interest bearing account, you should begin earning interest right away. Depending on the amount of bitcoin you deposit and the platform you use, the interest rate you receive from your savings account will vary. 

Since interest rates vary between 3% to around 10%, it’s a good idea to keep your funds in the savings account for the long term if you want to earn any significant amount of interest in bitcoin.

How Does Compound Interest Work for Bitcoin?

There are 2 main types of interest you can earn from a savings account: simple interest and compound interest. Simple interest only earns interest from your principal investment, while compound interest earns interest on your principal investment plus previously earned interest. Because of this, compound interest grows your account at a faster rate than simple interest.

Compound interest is added to your account at certain intervals specified by the savings account you invest with. The shorter the time interval is, the more you will earn from compound interest. This is because you’ll start earning extra interest on your previously earned interest as soon as it’s deposited into your savings account. 

BlockFi offers compound interest that’s deposited into your account on a monthly basis. Other platforms offer even shorter intervals for compound interest; Celsius offers weekly compound interest and Nexo.io offers daily compound interest. 

While shorter time intervals will grow your portfolio faster, there is not a huge difference in earning potential between compound interest that’s deposited weekly and daily. Intervals for compound interest are much more important when the interval is quarterly or monthly, as the interest you earn in this time will be much more than the daily or weekly interest you earn.

Pros and Cons of Earning Interest in Bitcoin 

A major benefit of  earning interest in Bitcoin is the high interest rates you can receive. While most traditional savings accounts offer less than 1% annual interest, most bitcoin savings accounts offer interest rates at least 5 times that of traditional savings accounts. And interest is paid in Bitcoin, so if the value of bitcoin appreciates so will the interest you’ve earned.

The biggest risk of using Bitcoin as a means of earning interest is the volatility of the cryptocurrency’s price. While you can earn 6% interest on your bitcoin, if the price of bitcoin falls just 6% then the USD value of your account will be worth the same after a year of investing. If you believe Bitcoin’s price will rise in the long term, then an interest bearing bitcoin account may be a good investment for you.

Trading Bitcoin vs Earning Interest

As a Bitcoin investor, you’ll need whether you’re going to trade or HODL your bitcoin. Trading your bitcoin is another way to accumulate more cryptocurrency, but you risk losing your investment to the market. 

With the prices of cryptocurrencies continuing to be volatile, trading crypto is a high risk strategy. Instead many investors who believe in Bitcoin simply hold their crypto to speculate on its value. If you plan to hold your Bitcoin over the long term, earning interest is a great low risk way to increase your bitcoin position.

Frequently Asked Questions

Q. Can I get free Bitcoin with a crypto interest account?

1
Q. Can I get free Bitcoin with a crypto interest account?
asked
1

You can earn free bitcoin with BlockFi by referring friends with your referral code. For each person who signs up with your referral code and deposits at least $100 into their interest bearing savings account, you’ll receive $10 of free bitcoin.

answered

Q.What’s the difference between Bitcoin and Wrapped Bitcoin?

1
Q.What’s the difference between Bitcoin and Wrapped Bitcoin?
asked
1

Bitcoin and Wrapped Bitcoin hold the same value because they’re tied to the same asset. While Bitcoin is the original cryptocurrency on the Bitcoin blockchain, Wrapped Bitcoin (WBTC) is a token on Ethereum’s blockchain that is pegged to the price of Bitcoin. Wrapped Bitcoin can be used with smart contracts on Ethereum’s blockchain, allowing you to earn interest on WBTC without a centralized 3rd party to manage your funds.

answered

Try Gemini

Gemini builds crypto products to help you buy, sell, and store your bitcoin and cryptocurrency. You can buy bitcoin and crypto instantly and access all the tools you need to understand the crypto market and start investing, all through one clear, attractive interface. Gemini Crypto Platform offers excellent account management options. You can manage your account at a glance, view your account balance 24-hour changes and percent changes. Get started with Gemini now.

Exclusive: Cryptocurrency Weekly Newsletter

What you’ll get: a deep dive into relevant crypto projects, exclusive insights into alt coins from the pros & more!