For the most part, cryptocurrency is treated like securities. Those who invest in crypto will trade their digital assets on crypto exchanges to realize a profit when the price of their assets rises. However, while trading is one of the easiest activities for crypto enthusiasts, the truth is that decentralized finance has already penetrated other markets that traders may not know about.
One alternative activity that investors can pursue is lending their digital currency to borrowers online. If you’ve heard of this but don’t know enough to dive in, let’s take a closer look at crypto lending in the cryptocurrency industry and how it can empower you.
First of all, what does it mean to lend your cryptocurrency to others?
As you’re well aware, lending is the act of offering someone a loan for business or personal activities that they will pay back at a specified date. The incentive for investors to lend their money to others comes in the form of the interest rate attached to the loan, which provides a return over time. Lending crypto assets works the same way.
To help those who may not be able to access funds at traditional lenders, you can offer crypto loans to borrowers who will give you collateral in the form of assets like Ethereum, Bitcoin, or Litecoin while you offer them stablecoins in return (USDT, USDC, DAI, etc.). You’re protected because you’re offering stablecoins and have their crypto assets in the event that they don’t fulfil the loan terms.
If you’re interested in lending crypto to others, you can begin your journey by looking for crypto lending platforms that offer you the features and ease of use you need to get a seamless start to your new investment activity. Whether you love BlockFi, Nexo, or the Celsius Network, you’re sure to find a platform in the crypto market that will help you grow your funds.
Why would I want to consider crypto lending?
Unlike traditional lending, alternative lending is far more accessible to investors. Why? Although regulation in the cryptocurrency industry is much more stringent than before, crypto assets are still assets that absolutely anyone can acquire and own by signing up for a cryptocurrency exchange and purchasing their favourite assets.
Since this activity isn’t tied to traditional finance, this also means accessing benefits like higher interest rates, greater liquidity as collateral is received in the form of other cryptocurrencies, and the ability to choose the level of risk that you feel most comfortable with. Put simply, crypto lending gives you full control over your money.
How does crypto lending empower me as an investor?
Unlike traditional lending, the crypto lending industry comes with far fewer restrictions and regulations. This lends itself to a much simpler way of earning money through loaning out crypto than you would experience if you were to use fiat currency. This, in combination with the benefits and freedoms listed above, is why making the decision to loan out your crypto assets can be such desirable investment activity. In the end, you’re in control of the whole process!
Many crypto investors believe that the only way to make money off of the crypto industry is to buy low and sell high. However, this simply isn’t the case. Bitcoin and alternative cryptocurrencies have penetrated multiple industries that give you greater flexibility over your investment options. If you’re looking into new ways to start making money off of your crypto portfolio and believe that lending may be the right choice for you, use the guide above to learn more about crypto lending and how it empowers you as an investor.