June 2, 2023
Many traders live busy lives, and they’re not able to constantly watch the market or make trades quickly. There are several creative ways traders can invest their crypto beyond simple transactions. This includes strategies like staking and lending your crypto, which can garner passive income.
While staking crypto has taken centre stage as the newest way for crypto holders to use their crypto, crypto lending also has numerous benefits to consider.
Want to learn which one is right for you? This article will compare crypto lending vs. staking and help you decide.
Crypto lending consists of borrowing extra funds by depositing collateral. Similar to personal loans, the crypto loans traders receive are useful for multiple purposes - which we go into detail below.
Unlike traditional loans, interest rates vary on different platforms, usually between 5% to 15%.
Loan duration and other terms also vary - which makes them much more convenient. Traders can find loans at lower interest rates that last days to months.
To keep the loan viable, traders must make monthly payments to their lenders. If they don’t default or the collateral doesn’t lose significant value, traders receive their collateral back in full at the end of the term.
In crypto staking, traders pledge crypto to a blockchain that uses the proof-of-stake (PoS) model. Staking your crypto is how new transactions are added to the blockchain protocol. In PoS blockchains like Ethereum, traders who stake large amounts are chosen as validators. Validators are tasked with the important job of validating new transactions.
Learn more about staking crypto RIGHT HERE
The more crypto you stake, the higher your odds are of being chosen and of receiving staking rewards. When a new block is added to the chain, a new cryptocurrency is minted and given to its validator. Though you can un-stake your crypto, as it still belongs to you, most crypto must stay pledged for a minimum duration.
To get started in staking, choose and buy crypto that uses the PoS system. Ethereum, Cardano, and Solana are three widely-used PoS blockchains.
You can either stake your crypto on the blockchain through the exchange or move it to your blockchain wallet. Your blockchain wallet will securely hold your crypto. They’re considered the safest option since you’re fully in charge of the wallet and its contents. You can stake crypto using your wallet address on your exchange account. Choose the type and amount you want to deposit.
Finally, you can join a staking pool, where traders combine their stakes to create a bigger impact on the blockchain. By doing so, traders who participate in staking pools are more likely to receive more significant rewards. You may have to pay a small fee of 2% to 5% of your rewards to join. Ensure your staking pool is reliably online and large enough to stay stable while not becoming oversaturated.
PRO TIP! You can earn interest on your crypto with YouHodler. No complicated steps are required. Simply deposit crypto to your YouHodler wallet and start earning interest immediately!
Receiving a crypto loan has a standard process, although some steps might vary on different platforms. The biggest differences are between centralized finance (CeFi) and decentralized finance (DeFi) loans. Centralized finance platforms operate as regulated institutions, and use more traditional financial instruments. While they’re safer, they also require users to verify their identity.
DeFi platforms use decentralized blockchain technology like smart contracts, so users can stay anonymous. While they are fast and allow users more privacy, they also come with higher interest rates and more risk.
Suggested reading: CeFi vs. DeFi - Know the Difference
YouHodler has a quick and painless KYC process. It takes just a few minutes with 24/7 customer support ready to help if needed.
After buying your desired crypto, deposit it into your account for use. Keep in mind how much collateral you’ll require for your needed loan.
This includes your loan’s duration, LTV (loan-to-value) ratio, fee, and more.
That’s it! Check your wallet and you’ll see your loan there. To get your collateral back, simply pay the loan in full before the end of the due date.
Just like with any other trading strategy, both staking and lending crypto comes with inherent risks.
PRO TIP! You can mitigate risk and potentially avoid margin calls by choosing a more conservative LTV and using YouHodler's “Take Profit” feature.
So, which option is better? There are several advantages to crypto lending that staking doesn’t offer.
Unlike staking, crypto loans give you more funds to work within your trading. The process is fairly simple and very fast. There’s no limit to what you can use your borrowed crypto for. You can use it as
YouHodler has lower interest rates than banks and much less paperwork involved. As long as you’re able to meet the minimum monthly payments, you’ll also receive all your collateral back.
With staking, you must pledge a minimum amount for the blockchain to consider choosing you as a validator. In Ethereum, for example, you must pledge 32 ETH - over $27,000! However, with loans, you can turn a profit at any amount you need.
Not only can you use a loan for any purpose, but you can also customize its terms. From the duration to LTV, you can ensure your loan suits your trading goals and needs.
You don’t need to provide your financial information, like a credit score, to receive a crypto loan.
Staking requires a minimum duration, and the longer you stake, the more rewards you get. However, there are many strategies you can use to turn short-term profits with a crypto loan. Loans need far less time and energy from you!
So don’t sell your crypto, lock it in some anonymous DeFi platform or wait in line at the bank for a loan. Go with a trusted institution like YouHodler that’s more convenient and affordable for you.
Disclaimer “The content should not be construed as investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product. It is made available to you for information and/or education purposes only.
You should take independent investment advice from a professional in connection with, or independently research and verify any information that you find in the article and wish to rely upon.”
Editor-in-Chief of the YouHodler blog. Connect with him about writing techniques, cryptocurrency, and music.
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YouHodler is regulated in the EU (Italy) and Switzerland, and does not have a regulated UK entity. YouHodler is NOT regulated by the FCA, and protections offered under UK law do not apply.
YouHodler promotions are not targeted at UK investors, and bonuses or loyalty programs like the rewards programme or sign-up offers will not be available to residents of the UK. You can learn more about the services offered to UK customers here.
Do not invest with YouHodler unless you’re prepared to lose all your money or tokens invested. Crypto Currency is considered as a speculative and high‑risk investment and you are unlikely to be protected if something goes wrong. Take 2min to learn more about risks.
YouHodler is regulated in the EU (Italy) and Switzerland, and does not have a regulated UK entity. YouHodler is NOT regulated by the FCA, and protections offered under UK law do not apply.
YouHodler promotions are not targeted at UK investors, and bonuses or loyalty programs like the rewards programme or sign-up offers will not be available to residents of the UK. You can learn more about the services offered to UK customers here.
Do not invest with YouHodler unless you’re prepared to lose all your money or tokens invested. Crypto Currency is considered as a speculative and high‑risk investment and you are unlikely to be protected if something goes wrong. Take 2min to learn more about risks.