Nowadays, people are talking about investing in a cryptocurrency savings account. Before investing in something, you need to understand everything about it. This article will tackle the things you should know about cryptocurrency.
Cryptocurrency savings account attains a higher yield of interest relative to traditional banks. This new type of saving accounts is made to accept and hold crypto deposits, including Bitcoin, Ethereum, and other cryptocurrencies.
“BlockFi gives account holders earn up to 8.6% APY on their crypto deposits. This highest rate currently applies to the cryptocurrencies like the Gemini Dollar (GUSD) and the Paxos Standard Token (PAX), yet you’ll earn more like 5% to 6% with digital currencies like Bitcoin and Ethereum,” as Forbes report stated.
Moreover, BlockFi, Linus, Outlet, and Gemini are platforms that offer services to invest in cryptocurrency savings accounts. But like any other investments, cryptocurrency savings account obtain risks that people should assess to manage their risks.
According to the founder of Ternio Ian Kane, crypto-assets do not come with FDIC insurance, unlike traditional banks that can give up to $250,000 per account in the unlikely event of a bank failure to protect customers.
Another risk you should know in investing in cryptocurrency saving accounts is that they have withdrawal limits. Thus, this will constraint you from being liquid when there is a financial emergency.
Further, cryptocurrencies are affected by price volatility depending on market conditions. “They have no underlying fundamental value and suffer from many weaknesses as any sort of savings vehicle,” Robert R. Johnson, Ph.D., CFA, CAIA and Professor of Finance at Heider College of Business, Creighton University stated.
Having cryptocurrency savings accounts will not give you full control of your money. You could lose all or part of your funds without recourse if the administrator of your crypto savings account lends money to other parties and is never paid back.
Most people are discussing cryptocurrencies because of their high potential for yielding promising returns. However, it is important to note to do your due diligence to learn more about cryptocurrency so you can determine what strategy to take for your investment portfolio.