Hodlers of cryptocurrency do so mostly for capital appreciation due to the speculative nature of crypto assets. Even though this may seem true, you might not want to lock your crypto assets in your wallet when you can put it to more work.
As a crypto investor, crypto lending is one of the best ways to get short-mid term returns without having to sell your coins in the first place.
Some crypto exchanges such as Kucoin even go as far as offering annual percentage rates (APYs) of over 25% if you’re to lend out your crypto.
In this article, I’ll shall insights into what crypto lending entails and some of the best coins to lend to grow your digital assets.
• Rates for the likes of Bitcoin and Ethereum are lower compared to Stablecoins because when the market is bullish there is a higher demand for stablecoins from investors with long-term investments in view.
• The opposite is true for the bearish market in which investors look to borrow cryptocurrencies to go short.
• Bitcoin lending interest rates vary but are often very competitive, with some offering up to 12% on Annual Percentage Yield (APY).
SEE ALSO: The Top 5 Meme Coins To Invest In 2022
What Is Crypto Lending?
Crypto lending is an aspect of DeFI (Decentralized Finance) that involves lending your cryptocurrencies to borrowers through a lending platform. By so doing, “interests” known as “crypto dividends” are made as payment in exchange for the service rendered.
A lot of those platforms that deal in crypto lending also accept stablecoins as well as other cryptocurrencies.
The purpose of crypto lending is to allow your assets to gain value even while you hold them and decides not to sell them. So the crypto you lend appreciates in the form of interest which you can also invest for additional earnings.
The good part is that returns are fixed and protected from volatility. The impact of volatility on the interest earned only crystalizes at the point when dividends (repayment) of the amount lent are paid back to you.
Let’s see some of the best coins to lend and earn good returns.
Bitcoin is one of the best crypto coins you can lend in 2022. It was created in 2009 by Satoshi Nakamoto with a market cap of $383 billion. BTC’s price has skyrocketed from the time it was launched and it’s now a very popular household name.
In May 2016, you could buy one Bitcoin for about $500. As of Sept. 1, 2022, a single Bitcoin’s price was around $19,989. That’s a growth of nearly 3,900%.
You can lend Bitcoins with as much as 8.5% APY on a crypto lending platform like Crypto.com.
Still on the list of the best coins to lend in 2022 is Ethereum which is both a cryptocurrency and a blockchain platform with a market cap of $192 billion.
Ethereum has experienced massive growth since 2016 and as of September 2022, its price went from about $11 to around $1,568, increasing around 14,155%.
With Ethereum, you can earn as much as 8.5% on Crypto.com.
Unlike Bitcoin and Ethereum, Tether is a stablecoin, which means that it’s backed by fiat currencies like the Euro and the U.S dollars and hypothetically keeps a value equal to one of those denominations.
Its value is not as volatile as other cryptocurrencies and as a result, is often preferred by investors who are tired of the volatility of other coins.
If you are looking to earn interest on a stablecoin like Tether, you can invest up to $20,000 at an APY of 9.25%.
Although Polkadot is relatively new compared to the aforementioned coins, it has increased in popularity among crypto users and in the crypto market in 2021 and it’s predicted to rise and rival the likes of Ethereum given its present position.
The Polkadot (DOT)’s price rise of 80% is predicted by CoinPriceForecast. As of early 2023, Polkadot’s price is expected to reach 69.81 USD.
With a crypto lending platform like Crypto.com, on a 3-month lock-up period and minimum staking requirement of 40,000 CRO tokens, you can earn up to 14.5% APY on Polkadot.
Solana is another popular coin to lend with widespread support and a market cap of $10 billion. When it launched in 2020, SOL’s price started at $0.77.
By early September 2022, its price was around $31.25, a gain of nearly 3,958%. With Crypto.com, you can earn as much as 6.5% APY on Solana coins.
How Crypto Lending Works
The process of crypto lending involves a third party acting as an intermediary (usually a crypto exchange like Coinbase) between the lenders and borrowers.
The first party is the lender who might be individuals who want to hold onto their crypto assets to improve their values or those who want to grow the output of their cryptocurrencies.
The crypto lending platform is the 2nd party and it’s in the platform that the lending and borrowing transaction takes place.
Finally, the borrower is the 3rd party and final link in the chain. They are those who get the funds either for businesses or for other purposes best known to them.
The crypto lending procedure includes:
- The borrower goes to a crypto lending platform and requests a crypto loan.
- The borrower stakes the crypto collateral as soon as the loan request is accepted by the platform. Until the borrower pays back the entire loan, the borrower won’t have the opportunity to get back their stakes or collateral.
- Using the platform, the lenders will automatically fund the loan.
- The lenders will then receive regular interest as payments.
- When the borrower manages to pay off the whole loan, he will get back the crypto collateral he staked when he requested the loan.
Frequently Asked Questions (FAQs)
Q1. Which coins are most promising?
Those coins we earlier discussed are some of the most promising coins that you can lend in 2022.
Q2. Which platform is best for lending Crypto?
Some of the best platforms for lending cryptocurrencies include; AAVE, YouHodler, Crypto.com, CoinLoan, etc.
With crypto lending, comes an easy way of earning interest on your digital assets or crypto assets especially if you have a long-term plan of not selling your assets.
By so doing your assets can earn you some value in return which you can use in covering different expenses or even reinvest for more profits.
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