The 3 Best Crypto Lending Platforms For 2021
Cryptocurrencies present a ton of opportunities when it comes to making profits. Most investors are already familiar with popular methods such as margin trading or options trading like those found on the Bitlevex platform.
However, less experienced investors might find these methods of earning with cryptocurrencies overly risky, time-consuming, or complicated. Luckily, in the past couple of years, the array of financial services accessible through cryptocurrencies has been continuously evolving.
Fine examples of this evolution are cryptocurrency lending platforms. In this article, we briefly introduce you to this concept and explore 3 of the top platforms where you can lock your crypto and make it work for you.
What is crypto lending?
Crypto lending is a fairly recent financial product where cryptocurrency holders can lock in their funds to gain rewards. The process is simple – as an owner, you provide liquidity to the lending platform by locking in your crypto.
The platform then uses these funds to provide a line of credit to other users and charges them a fee for the service provided. A portion of these fees is then awarded to the liquidity providers in terms of weekly or monthly interest payments.
Worth noting is that the interest rates can differ quite a bit depending on the different platforms and the cryptocurrency that is lent. The reason behind this is the supply and demand of liquidity for different cryptocurrencies.
For instance, Bitcoin return rates are fairly low because of the high volume of lenders depositing BTC. On the other hand, less liquid cryptos usually have a higher annual percentage rate (APY) just because of this.
Finally, some platforms might encourage you in holding their proprietary crypto by providing higher rates for it than any other cryptocurrency.
All in all, lending platforms are a great option to earn passive income on your crypto, but also to access a quick loan using your crypto as collateral.
Best crypto lending platforms
With those basics out of the way, let’s have a more detailed look at 5 of the best crypto lending platforms on the market.
Celsius Network is a centralized lending platform where you can deposit and earn interest on more than 40 different cryptocurrencies. These include some of the most popular altcoins on the 2021 bull cycle, including Polygon (MATIC) and Synthetix (SNX).
The best thing about Celsius is that interest rates are paid out weekly and compound to your existing capital, bringing in more profits every week.
The platform also has its own cryptocurrency, CEL, and choosing it as a payout method will grant you even higher APY.
Nexo is the closest competitor to Celsius on the market. And while the choice of cryptocurrencies is fairly limited (15, including stablecoins), Nexo stands out with the fact that you can also deposit cash money to gain interest.
This way, crypto holders can diversify their holdings into cash and gain up to 12% of their cash savings in USD, GBP, or EUR.
Finally, there is also the NEXO token that grants increased interest rates and discounts on withdrawals.
Aave is different from the aforementioned lending platforms as it’s entirely decentralized. This means that instead of sending your funds to a trusted party to handle, lending is executed directly peer to peer with the help of smart contracts.
This elimination of intermediaries in the process ensures a permissionless, secure process, that allows anyone across the globe to access advanced financial products. As such, lending platforms like Aave are one of the most popular financial services in the decentralized finance (DeFi) ecosystem.
In addition to discounts, the AAVE cryptocurrency is used for governance on the network, letting holders decide upon the future updates of the platform.
Lending platforms are a boon for crypto investors that don’t have the time or knowledge on how to make the most of their crypto holdings in this unforgiving market. They provide a relatively safe stream of passive income, for dozens of different popular cryptocurrencies.