What is a Cryptocurrency Savings Account & how does it Work?

by Mitov Mitrovski

These days everyone is talking about cryptocurrencies. Even if that is not your field of interest, it is simply impossible that in recent years you have not become at least a little interested. Apparently, it is something that has brought wealth to many with very little investment and no effort later. Sounds like a utopia. And it certainly is for many, but it was possible to profit that way in the beginning. It now takes some knowledge of cryptocurrencies and luck to invest in the right one.

It has become a global phenomenon and even the most powerful people in the world are constantly talking about it. In the last month alone, the richest man in the world, Elon Musk, has invested hundreds of millions of dollars in Bitcoin, thus significantly increasing the value it. And a few days ago, Bill Gates said he wasn’t a huge fan of it all, which led to a drop in value. You understand how important this topic is when even Musk and Gates comment. And therefore the value is very volatile because many factors influence the value. Since you probably know the basics about cryptocurrencies and wallet, you are now interested in learning more about savings account and how it works, because you are not sure if it works like a classic savings account or not. The answers to these questions, as well as some of the best saving accounts you can found in the rest of the text.

What is a cryptocurrency savings account and how does it work?

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It will not be difficult for you to understand this concept of a savings account because it is practically the same as with traditional savings accounts. Of course, the difference is that with traditional ones, you give money to the bank and give them permission to lend your money to someone else. You get interested on an annual or monthly basis. While with cryptocurrencies you give savings account provider Bitcoin or some other currency, so that the provider, like the bank, would lend it to someone else and pay you interest. So practically the only difference, in the beginning, is that you give the bank dollars and you give the provider Bitcoin.

There are several differences that can have a long-term impact. The biggest difference and risk with cryptocurrency savings account compared to traditional ones is the lack of an insurance body such as the Federal Deposit Insurance Corporation (FDIC). When you give money to a bank, even if the bank goes bankrupt, your funds are safe. While due to large changes in the value of cryptocurrencies, it can happen that what is given to the provider loses significantly in value. Precisely for this reason and because interest rates are incomparably higher in cryptocurrencies, this should be viewed more as an investment than as classic savings. In traditional interest rates, it is usually below 0.5 percent, while in cryptocurrencies it is over 5 percent in the past. The third big difference is that in traditional savings you can withdraw money at any time, while in this case they probably won’t have access to your funds for a certain amount of time. Or you will be charged a large withdrawal fee.

Is it worth starting to save cryptocurrencies?

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There is no single answer to this question, and that is clear to you now that you know the differences from traditional methods. It is up to you to decide if you want to accept the risk, which can certainly pay off. All the people who have invested in it know that it carries a risk with it, but the potential reward is so great, that it is reasonable to accept risk. In any case, you will not find such a yield anywhere. So, if the provider offers you to save any amount, so there is no minimum, you can earn a lot from a very small starting amount.

How to get started?

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The most important thing is to choose a reliable provider. This is even more important than when choosing a bank, because as we said the FDIC is there to “save” you while you have no protection here. So we will tell you some of the main factors to pay attention to when choosing one. First of all, inquire about safety. Check who has already done business with them and also what their financial stability is. That should be a good guarantee that you will not go bankrupt.

Next, you need to pay attention to whether the provider accepts the cryptocurrency you have chosen to save. No provider offers the ability to save all cryptocurrencies because there are too many. So you have to choose the one who accepts yours. Lastly, it is positive if you have the opportunity to buy cryptocurrencies through a provider, and not just save. The best option is when you can buy and send it directly to your account.

Best accounts

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We will introduce you to the three most popular places where you can save, and if you want to compare even more different accounts and what they offer, check this website.

1. BlockFi

BlockFi is famous for offering by far the highest interest rates, even over 8 percent, which you will agree is insanely high yields. They have very reliable cold storage, which is also a big plus. If you don’t know what cold storage is, it’s an offline wallet, which can’t be attacked by hackers. So BlockFi is a reliable choice.

2. Linus

You remember that we said that you cannot withdraw funds whenever you want, as you can in traditional banks. Linus is different from others because you can withdraw an investment whenever you want and without paying fees. This certainly attracted a large number of people. Yields are very good too, although not as with BlockFi, at least you know that your investment is always available to you.

3. Nexo

Do you want to get yields quickly? Then Nexo is the right choice for you because Nexo works on a daily basis. You can get daily interest payouts, and the lockup time is only 24 hours.

Conclusion

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We believe that reading this article has solved all the doubts you had on this topic and that you now know exactly what you want to do with your assets.

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