HOW TO LEND CRYPTO 💸

What Is Crypto Lending, Exactly? 🤔 

Do you know how regular loans work? A bank gives you money so you can buy something, like a house or a car, and then you pay it back over time with interest. Crypto loans are similar, but with one key difference. Instead of getting a loan from a bank, you get it from another person who has crypto. So instead of asking a bank for money, borrowers ask people like you who have crypto.

But the dynamic is the same: They borrow, you lend.

How can you find people who want to borrow your cryptocurrency? In traditional loans, borrowers usually go to a bank to request money. But now, there are crypto lending platforms (also known as crypto lenders) that make it easier to connect with borrowers.

Lending platforms connect borrowers and lenders, just like a money market. They use your crypto to lend it out and pay you a small amount called "yield" for participating. The yield starts accumulating right away and is based on your share of the lending pool.

Lending Crypto In 2024: Industry Insights

2022 was a tough year for crypto lenders. Big platforms like Celsius and BlockFi went bankrupt. But in 2023, more people are turning to decentralized lending because they don't trust centralized platforms with their digital assets. Also, if interest rates go up, crypto lending could become more profitable like traditional finance products.

Pros And Cons Of Lending Your Crypto

PROS

  • Earn money on your crypto in a different way than just riding the market

  • Earn money at better rates than you would with a traditional loan/bank

  • Start with as small an amount as you’d like

  • Any crypto owner can participate

CONS

  • If a platform goes under, so does your money—there’s no Federal Deposit Insurance (FDIC) to insure your funds

  • If there’s market volatility and you’ve lent out your crypto, your hands are tied

  • A borrower could default on all or part of the loan

Who Should Lend Crypto?

Crypto lending may not be suitable for everyone, but it can be beneficial for certain individuals. Those who are interested in earning interest on their crypto investments can consider it. It is particularly advantageous for long-term investors who are willing to wait for the value of their crypto to increase. However, it is important to note that there may be lock-up periods where you cannot access or sell your crypto. Additionally, individuals who can handle market volatility should consider crypto lending, as prices can fluctuate significantly. It is essential to be prepared to endure any potential financial storms if your crypto is tied up in loans.

Which Crypto Can You Lend?

If someone wants to borrow a cryptocurrency, you can lend it to them. It's that simple. The more people who want to borrow a specific token, the more likely someone will be willing to lend it. However, if you have a less popular coin that didn't become successful like you thought, it may be harder to lend it out. DeFi protocols provide many different tokens and stablecoins for lending. The list keeps getting longer, but remember that there is more risk involved when lending and borrowing speculative tokens. Also, assets that are more prone to price changes may have less available funds for lending.

Where To Lend Crypto

Once you know that people want to borrow your cryptocurrency, you need to find a lending platform to assist you. There are many platforms available, each with their own rules, supported crypto assets, and rewards. Take some time to explore different platforms and protocols that match your objectives. While we can't list all the exchanges here, we'll provide a brief summary of some popular lending platforms.

Crypto Lending Vs. Staking

Crypto lending and crypto staking are among the most popular ways to earn a yield on crypto.

  • When you lend crypto, When you lend money to someone, you earn interest on it. However, there are risks involved in lending your hard-earned cash.

  • When you stake crypto, You give your crypto tokens to a computer on the blockchain called a validator. Validators with more tokens have a better chance of creating a new block and earning rewards. Basically, validators need your crypto to make money and they share most of it with you and other stakers, after taking a fee.

Finishing Thoughts 💭 

Lending crypto can be a good way to earn extra money, and it's usually easier than lending in traditional finance. However, it's important to do your research before transferring your crypto to a lending platform or approving a lending contract.