From the Mint team: Mint may be compensated if you click on the links to our issuer partners’ offers that appear in this article, including Chase. Our partners do not endorse, review or approve the content. Any links to Mint Partners were added after the creation of the posting. Mint Partners had no influence on the creation, direction or focus of this article unless otherwise specifically stated.
You’ve probably heard a lot about cryptocurrency recently, from massive swings in value to media reports about Bitcoin volatility and speculation. But cryptocurrency is more than just a buzzword—it can be part of your financial strategy and help you grow wealth for the future.
You don’t have to be a Wall Street genius or tech whiz to start earning on the crypto market. In fact, many regular, everyday investors use crypto as an important source of passive income. By purchasing crypto and keeping it on an interest-earning platform, you can put your crypto assets to work, receiving interest that’s paid out each month, without lifting a finger.
These platforms often provide a higher yield than you’d find at some traditional financial institutions. It’s an easy, safe, and convenient way to generate returns. But you may be wondering how it all works. Let’s take a closer look at the surprising ways that crypto investing can contribute to your financial goals.
How Do You Get Interest on Interest?
Nearly anyone can earn interest on their crypto assets. All you need to do is transfer your crypto holdings to a reliable interest-earning institution or service provider. In some cases, the interest is compounding, so you earn more month-over-month just by keeping your assets on that platform. It’s a convenient way for investors to earn more in a passive way, without having to make daily adjustments
But what if you don’t own any crypto? Not a problem. Investors can typically transfer US dollars into their account, and these funds are automatically used to purchase the equivalent value in stablecoins, which are crypto assets pegged to a traditional asset, like the US dollar, making them relatively stable and low-risk. Of course, unlike US dollars, stablecoins can earn you a higher interest rate.
Depending on the service they choose, investors can also transfer more funds into their accounts at will, make withdrawals, trade between different cryptocurrencies, or even use their assets as collateral for a crypto-backed loan.
Why are the yields so high in the crypto market?
Because many of these platforms generate interest on assets by lending them to trusted institutional and corporate borrowers. If you’re concerned about the potential for lending-related losses, find a platform that lends crypto on over-collateralized terms while using thorough risk management processes, such as an automated system that monitors positions 24/7, and make sure the company maintains reserve balances to facilitate client withdrawals.
You should also look into the platform’s past performance as an indicator of how it balances risk factors. If the company has a perfect track record for clients and has the backing of well-known investment partners, it’s usually a sign that your assets are in good hands.
It’s Safer Than You Think
If you’re worried about cybersecurity concerns when investing in crypto, you should know that the process is much safer than you might think, especially when working with a trusted platform.
Managing risk and security should be the default operating model for the crypto platform you choose to invest with. It can be also useful to select a platform that’s domiciled and regulated in the US, institutionally backed, and one that doesn’t have a utility token. That’s important–be sure to work with crypto companies that play by the rules.
What about personal data and privacy? Since crypto is a technology-based currency, most providers in the space take data protection very seriously. Platforms usually rely on strong encryption, such as modern ciphers, supported protocols, and multi-factor authentication. When data is transmitted, they assume zero trust of the underlying network and apply additional application-level authentication, authorization, and encryption.
Moreover, a crypto network should have a minimal presence on the public internet and all internal networks should only be accessible by authorized users. Restricted sections or restricted services on the network must require further authentication, authorization, and in some cases specifically configured devices that have been subjected to additional security controls.
Nothing contained in this announcement should be construed as a solicitation of an offer to buy or offer, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction. The information provided in this announcement is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This announcement is not directed to any person in any jurisdiction where the publication or availability of the announcement is prohibited, by reason of that person’s nationality, residence or otherwise.
Neither BlockFi nor any of its affiliates or representatives provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
Digital currency is not legal tender, is not backed by the government, and crypto interest accounts are not subject to FDIC or SIPC protections. Learn more at BlockFi.com.
BlockFi Lending LLC NMLS ID#1737520 | BlockFi Trading LLC NMLS ID#1873137