How to Generate a 10% Yield on your Savings with Crypto
For those with a high risk tolerance and the stomach to handle the violent price swings found in the crypto market, there is no denying the immense returns realized over the past few years.
Over the past 5 years, the growth focused QQQ, one of the best performing ETFs on the market, has returned a huge 242%. As fantastic as that is, there is simply no comparison to crypto which had a 7,793% return over the same time period.
The future of crypto is still uncertain and therefore still creating opportunities for investors to bet on its future. It’s important to remember that volatility goes both ways, and it is common for the crypto markets to experience year long bear markets where price action is underwhelming. Most experienced investors are prepared for this and use these periods for accumulation and positioning for the next bull run.
“Hodl” is a popular term in the crypto sphere that reflects the long term buy and hold mentality many crypto investors have. The problem this poses for investors is what to do with their crypto while they hodl?
For security purposes, keeping your crypto on an exchange is not recommended. Many recommend cold storage for maximum protection of your assets. Another popular option that strikes a nice balance of security and convenience are hot wallets such as coinbase wallet and exodus.
Then there are platforms like Blockfi and Celsius that offer an enticing destination for your crypto assets. These services pay you an interest rate on your deposited crypto by lending it out while you wait for long term price appreciation.
This relatively steady rate of return can be crucial during bear markets when your assets are underperforming. Investors know the importance of putting their money to work and the power of compound interest and Blockfi and Celsius provide this functionality.
Blockfi vs Celsius
In this comparison we will focus on the following topics:
- Security
- Interest accounts
- Borrowing
Security
Both platforms have yet to be hacked or lose any user funds. The biggest risk is how each platform holds user deposited crypto assets and how and who they lend them out to.
Blockfi uses Gemini as their primary custodian.
Celsius uses Bitgo as their primary custodian.
Blockfi tends to lend crypto to institutional borrowers such as Fidelity.
Celsius lends to cryptocurrency exchanges and hedge funds.
Which is better? We will have to wait and see, as mentioned, so far neither have had any incidents of lost user funds.
Interest accounts
Blockfi’ s interest rates are heavily tiered and vary drastically based on quantity.
Blockfi’s interest rates for bitcoin vary from 4.5% for 0–0.1 BTC to 0.1% for >0.35 BTC.
Blockfi’s stable coin interest rates are a bit better. For <40,000 USDC interest is 9% and >40,000 yields 8%
Celsius’s interest rates for bitcoin are simply 6.2% for <0.25 BTC and 3.05% for >0.25 BTC.
Celsius’s interest rate for a stable coin like USDC is currently a flat 10.02%.
Borrowing
Loans are based on loan to value ratio, the lower the LTV the more favorable the terms.
Blockfi rates:
50% LTV — 9.75%
35% LTV — 7.9%
20% LTV — 4.5%
Another important consideration is the 2% origination fee charged on new loans.
Celsius rates:
50% LTV — 8.95%
33% LTV — 6.95%
25% LTV — 1.0%
Celsius does not charge an origination fee on loans.
Closing thoughts
Blockfi and Celsius both offer a great service to crypto investors, allowing them to generate an interest rate on their digital assets and access capital through their borrow feature without having to sell their positions.
So far they are the gold standard in the industry with a perfect track record of safety and delivering on their promised features.