Back in 2015, one Bitcoin was valued at about $300. In 2021, it is now valued at almost $54,000. While it is not a get-rich-quick scheme, there is enormous potential to profit from the cryptocurrency market.
However, due to little to no regulation and highly volatile markets, investing in today’s market without due diligence is akin to loitering the Sahara searching for a cold drink. It first seems like a considerable risk, but it is rewarding for people with good strategies and reliable information.
Today’s guide is therefore aimed at how cryptocurrencies can be used as a savings portfolio to help increase your yields while building your wealth. If you have any burning questions about a crypto savings account, you have found the perfect guide, so read on!
Crypto Savings Account Explained
Crypto savings accounts function like the traditional banking system as a haven for your money. It is virtual and a modern way meant to do away with challenges in money banking. It allows users to access the cryptocurrency market while accumulating interest, just like a typical account.
Users can also deposit cryptocurrency or other assets into the account. Return on investment varies depending on the type of cryptocurrency stored. The interest paid is realized when your savings service provider lends your funds to debtors who, in turn, pay interest on the loans.
The main differences from a traditional savings account are;
- Funds Access – cryptocurrency savings accounts, unlike traditional systems, may limit your account access for a specified period after deposit. There may also be charges for withdrawing finances before your selected date
- FDIC insurance – cryptocurrency savings accounts lack insurance from the Federal Deposit Insurance Corporation. The insurance guarantees account holders that their monies are protected from loss. With cryptocurrency savings accounts, your funds could decrease in value leading to a loss of investment
- Yield – cryptocurrency accounts have higher interest rates than traditional savings accounts. The yield could rise to 9% per year while those of banks span from 0.1% to 0.6%
Is Crypto Saving a Great Long-term Investment?
Whether cryptocurrency assets are good investment decisions typically depends on whether they will achieve mass adoption. For instance, bitcoin is often equated to gold. It has a maximum supply of only 21 million coins; hence it is viewed as a rare asset that can grow in value while fiat currencies depreciate.
Ethereum, on the other hand, seeks to serve the global computing world. Its launch of Decentralized Apps and smart contracts could impact thousands of significant industries, including banking and real estate. If Ethereum and Bitcoin achieve these goals, investing in cryptocurrency will become highly rewarding.
However, once you realize that crypto savings accounts are not as safe as the traditional banking systems, you should then decide if they are worth the risk. But with no risk, there is no reward. Therefore, the value of your assets can easily appreciate with time, and there are only a few places where you can draw an 8% return on your savings.
Most crypto savings accounts have excellent terms for account holders. Some do not have minimums; hence you could start small and build your account gradually. Other wallets offer some decent returns.
Why you Should Be Cautious with Cryptocurrency Savings
The first one is pretty obvious. Cryptocurrency is generally flagged as volatile hence there is a huge potential to lose your hard-earned money or lose the value of your investment. Moreover, you cannot just withdraw your funds when you feel like it.
Crypto wallets require users to give up access to their keys. This is because your crypto ought to be made available to borrowers, although most investors are often not content with this. Finally, most cryptocurrency savings accounts only pay simple interest but not compound interest.
Best Cryptocurrency Savings Account
Each crypto savings account has unique terms different from the other. It can be challenging to settle on the best savings account with so many options that will offer value for your money—the most popular range from BlockFi, Linus, Gemini, Outlet Finance to Crypto.com and YouHolder. Some savings accounts like Outlet Finance and Linus do not necessarily require account holders to own cryptocurrencies.
They accept deposits in the form of US dollars, and the interest is paid in dollars. Nonetheless, investors are still exposed to highly volatile market risks. The risk profile in these accounts is similar to the typical crypto accounts. All these savings accounts, while different, are all investments.
Therefore, take your time, do some due diligence to avoid crypto scams, and you will be on your way to building your portfolio. Find the best that suits your needs, financial budget, and strategies.
Crypto Accounts Vs. Crypto Wallets
How do crypto savings accounts differ from crypto wallets? Below are the standard dissimilarities between the duo:
- Interest Rates – the number of coins ‘stored’ in savings accounts increases with time, while wallets only act as a haven for your coins
- Security – this is debatable as some investors say wallets are not a good form of security. Misplacing your phone could lead to the loss of all your money. Crypto banks are considered relatively safer
- Key owners – owners of crypto savings accounts have to give up their keys to service providers, while with wallets, only you have your safety key
If you are looking for a worthwhile investment option, a crypto savings account may be just what you need. Take your time to find and compare various savings accounts and find one with the best features overall before you sign up. Minimums, fees, barriers to entry, rate of interest are some of the factors to consider.
Nonetheless, these accounts are not made for everyone. They are not an ideal place to store emergency funds; hence, one should also write down the pros and cons of having one and the risks involved. The opportunity to gain 8% as returns could be worth the risk, but when the deal is too good…