Whether you are just starting out in the world of crypto or transitioning toward decentralized finance for most of your financial ventures, the success of your crypto experience will largely depend on the exchange you partner with and the crypto interest rates they provide.
Importance Of Crypto Interest Rates
Think of crypto interest rates like the rates of interest at a traditional bank. By locking fiat currency in a Certificate of Deposit (CD), you can earn interest on the initial deposit and earn compounded interest as well.
The significance of crypto interest rates can be understood by comparing them to those offered by traditional banks. Many of the best offers for a CD fall somewhere within the range of 0.4-0.6% interest, while crypto interest rates have the potential to reach nearly 13%.
A difference this sizable has been enough to capture the world’s attention, which is good news for those getting started with crypto. This can be seen via the competitive rates and offers available when opening an account through a crypto exchange.
For example, Vauld offers some of the best interest rates for a variety of crypto while also providing several ways to build wealth, no hidden fees, and a long list of security features.
You might ask: If crypto rates are such an important piece of earning interest, then why bother worrying about any of the other elements mentioned?
Since crypto exchanges are the equivalent of fiat currency’s traditional banks, finding the right one is critical to more than just your financial goals. Your security, communication, and wellbeing are in play as well. More on this in a bit.
For now, let’s look at the types of rates a crypto exchange will typically provide.
Types Of Crypto Interest Rates
For all individual crypto endeavors, any good exchange will conveniently list their rates on their website. To see what this looks like, you can view our current rates here and discover what we offer at Vauld.
Savings Vs. Fixed Deposit Rates
Opening an account with a crypto exchange and depositing funds means immediately beginning to earn. Simply holding assets in an account will earn a savings rate, while locking them in for a predetermined period will earn a fixed deposit rate.
Choosing between savings and fixed deposit rates will depend entirely on your goals, such as how much you are looking to increase your assets. If you are content with keeping risk low and just want a place to store your crypto, a savings account is perfectly sufficient.
For users interested in earning more, locking in your funds for a set time will provide those higher rates. DAI, for instance, has a current savings rate of 9.41% at the time of this writing. Depositing DAI in a fixed deposit account, however, increases this to 12.68%.
An increase of about 2-3% is fairly common across the majority of cryptocurrencies and is the difference between simple and compounded interest. The former earns only on the initial investment, while the latter earns on the principal balance and any accumulated interest.
In summary, savings accounts will accrue interest at a slower rate compared to fixed deposits. Fixed deposits require you to lose access to your funds for a period of time that you agree to, but you are rewarded with significantly higher interest rates.
When it comes to borrowing against crypto, the rates work out well in your favor compared to borrowing with traditional banks.
When you take out a crypto loan, you are not trading your assets; rather, you are using your funds as collateral to obtain a percentage of it in fiat currency to be paid back over time. Borrowing rates can vary between 4-13% depending on the crypto and the terms.
For comparison, borrower rates for personal loans provided by fiat financial institutions can easily reach upwards of 36% or higher. This quickly adds up and can place you in a situation where you are paying off a loan for much longer than you originally anticipated.
For crypto borrowing rates, exchanges that offer percentages too far above the 13% threshold for certain tokens are likely not the best choice. The closer this number inches toward 20%, the more likely you could find a non-DeFi loan for a better rate.
Rates For The Long Term
Keep in mind that, at some point, you may decide to lend funds you’ve kept in savings accounts, transition to fixed deposits, and so on. Choosing an exchange that offers great options overall is better for the long term than selecting an exchange that excels in just one area.
Beyond Crypto Interest Rates
Continuing to use the CD comparison, choosing an option with good interest rates is a great place to start. However, there are several other factors to consider that are just as important as rates.
Crypto interest rates are only one part of the equation for financial and overall success. Think of it as choosing your CD by considering the pros and cons of the bank that offers it.
Just as finding the right bank entails deciding what type of account you are looking to open, what fees they may charge, digital options, customer service, and whether the environment of the branch fits your lifestyle, investing in crypto also involves many considerations.
Here are a few examples of things to consider along with crypto interest rates when choosing the exchange that is right for you.
Developing a diverse crypto portfolio is going to be difficult unless your exchange has a large selection of tokens to choose from. From Bitcoin and Ethereum to gold-backed digital assets like PAX Gold, having multiple options is ideal for the long term.
Even if you are only getting started with crypto, the ability to diversify down the road will open up significantly more opportunities than selecting an exchange with just a few tokens. For reference, check out our extensive list of tokens here.
Interested in diversifying your assets but not sure where to start? At Vauld, we are proud to offer options like Automatic Investment Plans (AIPs) to remove user complexity and guesswork from the process.
Along with AIPs, there are several ways to invest your assets. Having a variety of borrowing, lending, and trading strategies available will increase your wealth-building potential.
Dynamic trading options, for example, are going to be important for all crypto endeavors. An ideal exchange will offer many opportunities for users with various experience levels, whether making their first or fiftieth deposit.
For these options, we offer Instant Swap and Pro Trading at Vauld. Users looking to trade in small amounts at a fixed rate can easily do so with Instant Swap. And our Pro Trading option is ideal for users who want more intricate trading features, such as limit orders.
Just like a bank plays a key role in protecting a person’s fiat money, crypto exchanges are at the forefront of your crypto savings account’s security.
Precautionary measures such as safelisting, user alerts, multi-factor authentication, and biometric verification are important features to check for. These will help keep your funds in good hands.
Customer-centric platforms offer protection in a variety of ways. Here at Vauld, we’ve partnered with BitGo, a leading digital asset trust and security company, to ensure that all users’ funds are secured.
Limits And Fees
Unbeatable rates or offers can be difficult to pass up. However, not all offers are as great as they appear. Looking a little further might reveal undesirable features that prevent you from having total control over your assets.
Limits and fees can slowly sneak up on you and eat away at profits or limit when or how you can take out your funds. Diminishing user autonomy in this way and restricting access to funds is never worth a slightly better crypto interest rate.
At Vauld, there are no deposit fees or hidden fees, and only the required network fees would be deducted for withdrawals. This way, you can focus on your financial goals instead of worrying about fees.
Get The Best Experience With Vauld
Finding great crypto interest rates is part of long and short-term success, but keeping other features in mind when searching for the ideal exchange is just as important.
Whether you’re lending, borrowing, or trading crypto, choose Vauld for the best benefits and features across the board.
Partnering with Vauld means not only receiving competitive crypto interest rates but also quality customer service, an arsenal of security features, a knowledgeable community of like-minded crypto users, and so much more.
Experience the difference that an innovative and customer-centric crypto exchange offers to every customer by signing up with Vauld today.