January’s top interest rates on BTC, ETH and stablecoins
Earn yield on your cryptocurrency investments this month as we compare between leading DeFi and CeFi platforms
Happy New Year!
As 2022 rolls in, many of you will be looking to earn some passive income on your crypto — and there are plenty of options.
As you might be aware, there are two main approaches to lending your funds: centralized finance (CeFi) and decentralized finance (DeFi).
Given crypto can be a risky playing field, let's do a quick review of each model so you can better understand how they work and figure out which one best suits your needs.
CeFi refers to a company that uses classic legacy finance models to lend out your crypto, and it pays you interest for doing so. It's the safest way to earn passive income, but it has a few obstacles, namely KYC and AML practices. These platforms operate in much the same way as a bank does, with some companies even offering insurance.
DeFi allows you to borrow and lend crypto through smart contracts that automate the entire process. It doesn't require you to share any personal information, and you're always in control of your funds, which is one of the highlights of crypto. However, it has its risks, partly due to possible computer bugs or vulnerabilities on these protocols.
Between the two, you'll find higher rates on DeFi, but it comes with higher risks.
Let's take a look at the leading options in both these markets to help you make the right choice for your funds.
CeFi lending rates for January
This has to be my favorite CeFi platform. The main perks are that it doesn't charge any network fees for depositing, transferring or withdrawing, and we know how those fees add up over time.
BTC: 6.20% APY
ETH: 5.35% APY
USDC: 8.05% APY
Celsius has slightly changed its interest accounts on stablecoins, but aside from that, everything continues as from last year.
Celsius is best for your BTC holdings. ETH and stablecoins are extremely competitive, so research other options and find the one that suits you best.
What I love the most about Celsius is its loyalty program. If you hold its native token CEL, you get extra interest on the funds you're lending. This can go as high as 18%, but you must be willing to get paid in CEL rather than the token you deposited.
I find it a brilliant way to earn passive income on your passive income.
An important note: given Celsius is global, it offers different rates depending on your country of origin. Check which rate affects you and act accordingly.
Another favorite of mine, Nexo is best known for its daily payout option, which makes dollar-cost averaging a true stacking strategy.
BTC: 6% APY
ETH: 6% APY
USDC: 10% APY
Currently, it offers the highest rates on ETH and stablecoins, which can go even higher if you are using the Nexo token, adding 2% on your interest.
There are also loyalty rewards for NEXO token holders, whereby Nexo pays you a yearly dividend on your funds.
This is one of the pioneers in the crypto passive income space, and it opened the way for the plethora of options on the market.
Although it offers competitive rates, the rates fall drastically the more funds you deposit on the platform. On top of that, there's no native token for those looking to add interest to their interest.
DeFi lending rates for January
Without a doubt, my premier lending platform in DeFi is Aave.
It has built a sleek and elegant user interface that makes you feel like a pro. It's by far one of the most popular platforms in DeFi with its excellent charts and beginner-friendly feel.
Note that rates depend on demand, so if lenders outweigh the borrowers, rates will be lower.
At the moment, rates are extremely low, but since they're dynamic, they can easily rise. This requires being a bit more watchful of the market, but it has its payoff.
Aave takes a page out of CeFi´s book by using its own token. So if you're looking for a slightly higher rate, you could choose to earn Aave tokens.
An important note: most of DeFi operates on Ethereum, which isn't yet interoperable with the Bitcoin blockchain. As such, you'll run into "Wrapped" Bitcoin, which is a 1:1 tokenized version living on the Ethereum ecosystem that can be used for all decentralized applications.
Compound Finance ranks at the top for crypto users across the board.
The team has built a clean user interface that caters to beginners and veterans.
Compound and Aave are the two premier lending platforms on the market. They have earned their spot at the top, and although their rates are definitely not the highest, security and reputation go a long way in my book.
However, if you want to dip your toes in riskier waters, there are options out there for you. The broader DeFi space is teeming with options — not without risk, but surely with reward.
Use a DeFi dashboard such as Zapper to search for specific coins and different rates across different platforms.
Compare CeFi platforms
Let's get serious for a moment. Banks aren't going to give you satisfying interest rates, whereas crypto will.
Earning interest in crypto is lucrative, fun and wild at times. Specific platforms offer higher risk but also higher rewards, whereas others allow you to sleep easier at night knowing they have safer practices. Learn about each and make informed decisions.
This year will no doubt bring great opportunities and offers, but it's up to you to take the dive.