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Do you hold cryptocurrencies? Would you like to save your cryptocurrencies in some sort of savings account? If you wish to do so, then you can easily save your cryptocurrencies in the cryptocurrency savings account. It is a fact that in the past couple of years cryptocurrency has seen a lot of ups and downs in addition to a lot more progress and acceptance. With time, the crypto savings account popularity has also taken a new step ahead making people curious to use it and get benefitted.
In this article, we have in store for you the basics of the crypto savings account, why are they growing and getting spontaneously and also the reason it would soon replace the existing traditional savings account.
What Is A Cryptocurrency Savings Account?
The crypto savings account is quite similar to that of traditional finance’s bank savings account. The only major difference that people can use to differentiate both of them is that the traditional finance banks offer their savings account to the customers to save or hold their fiat currency of that country.
On the contrary, the cryptocurrency savings account simply implies storing of the digital currencies or the crypto assets. This can be treated as a savings plan that the crypto firms across the blockchain ecosystem offers for all the users who would not mind earning some passive income on their saved crypto assets.
How do crypto savings accounts work? They work quite similar to the traditional savings accounts that you hold in the bank. However, the best part is that the crypto savings accounts permits you to earn interest rates of up to 20% APY on all your cryptocurrency assets by staking them with a service provider.
Reasons Of Crypto Savings Account Popularity Reaching Heights
Before you jump into investing in any of the crypto saving accounts or cryptocurrency savings platforms, we think it is necessary to consider the benefits of these accounts and understand the reason for the crypto savings account popularity gaining such a momentum in such a short time span.
It is a fact whatsoever, that these crypto accounts do not operate in the exact same way as the traditional savings account does in the banks as well as the credit unions do. This is what brings the benefits and the challenges in the same platter to the users.
Here are some of the benefits that you can consider to be helping in the crypto savings account popularity in recent times.
1. Passive Source Of Income
The main point of saving your cryptocurrencies is getting into a passive source of income while your assets are secured in the storage. The crypto savings account offers a channel for the users to earn interest on crypto which is a passive income instead of holding their cryptocurrency assets in their crypto wallets.
2. Cryptocurrency Interest Accounts
Dissimilar to the traditional savings, the cryptocurrency savings accounts denominate and also pay the interest either making use of the USD interest rates or the interest rates based on the cryptocurrencies like the Bitcoin Interest Accounts. This permits the crypto connoisseurs to directly stack up their favorite crypto assets.
3. Relatively Higher Returns
The savings account of the cryptocurrencies offer a higher rate of return on the savings owing to the price volatility risk, which is 5%-12% APY on an average. On the contrary, the traditional bank savings account offers a meager 0.5% APY. If you think you can accommodate the risk, then you can go ahead and indulge in a crypto savings account that would boost your savings rate.
4. Security Of The Crypto Assets
The crypto savings account enables the users, especially the beginners, to store their assets securely, diminishing the chances of them losing their access to the wallets. Some of the platforms namely, AAX exchange and Crypto.com additionally possess insurance covers in case it encounters a hack.
5. Supplementary Incentives
Some of the crypto savings accounts like the Binance offers tokens, benefits as well as additional incentives to the users raising the overall earnings from the savings.
6. Cash Is Not All The Parts
Many of the crypto savings accounts are linked to your debit cards that enable you to spend them to win the daily purchases.
7. Perks / Rewards
Essentially, some credit cards too offer rewards as a method to originate customer loyalty. Some of the crypto savings accounts similar to Nexo and Celcius offer the users loyalty rewards that even includes bonus rewards and free withdrawals.
Downsides Of The Cryptocurrency Savings Account Hampering The Crypto Savings Account Popularity
Does the positives mean that you necessarily overlook the cons of the cryptocurrency savings account? Of course not! Here are some of the major downsides of these accounts that are affecting the growth of crypto savings accounts to some extent.
1. Financial Crypto Savings Are Not FDIC Insured
This is the per chance of the ideal exposure for the feasible crypto savings account holders. This means that if anyone hacks your account or even the institution goes below or backs off, you can no longer have an opportunity to watch the funds you might have saved. Although it is not similar to the other investment sources similar to shares, which will apparently be also no longer insured by Federal Deposit Insurance Corporation (FDIC).
2. Non-public Key Handover
Once you deposit your cryptocurrencies into your crypto savings account, apparently you will be asked to handover the non-public keys of your assets that can bring in some complications later. It is evident that you will reckon your keys similar to a non-public password. You would not be giving out the ATM PIN or CVV number to anyone else. Right? Think about it!
3. Withdrawal Limits
If you want to withdraw some funds from your cryptocurrency savings account, then there are a couple of hurdles that you have to face in opposition to the veteran or traditional bank savings account. While the traditional savings account usually limits the selection of the rate-free month-to-month withdrawals to 6, the crypto savings accounts are completely restricted. The platforms are also seen to fluctuate with the selection of the withdrawals that they permit.
4. Crypto Price Volatility
The price volatility of the cryptocurrencies is another important disadvantage that the customers need to be aware of. If the interest and the balance is paid in dollar-backed stablecoin, then it would be easy to account for the interest to be paid. On the contrary, if the interest and the balance is paid through Bitcoin (BTC), then the total balance and the payments will definitely fluctuate as per the market conditions.
This definitely means that the interest that you earn might be worth more or less on any given day. This makes it really hard to plan and learn if your account is truly getting you anywhere.
5. Counterparty Risks
You need to keep this in mind that the savings accounts on the blockchain zone are capable of offering you such steep yields owing to the fact that they are actually lending out your deposited cryptocurrencies at a much higher rate. This raises certain questions like who is borrowing it at 15% or 20% or even more for justifying a platform paying you 12% on your assets?
As a depositor, the risk you possess is the crypto exchange or the platform that you are making use of suffers a wave of defaults on their loans that they might not be able to cover. The result of a platform breakdown would be disastrous for the savers as they have their assets deposited on the platform.
What Factors Do People Usually Consider Before Choosing a Good Crypto Savings Account?
With the mixed feelings that people or rather investors would have after going through the pros and cons, it is evident that they must have gotten confused on how to choose the best crypto savings account. Well, there is nothing to worry about. Just abide by the below mentioned key factors while you are attempting to choose the best savings account in the crypto space.
Supported Tokens
Not all of the platforms will offer you an opportunity for savings against each and every crypto coin that is available. Thus, it serves as the key for the users to check properly which assets are available on which platforms before they start saving. This will offer them a clear idea on which platform to go for and compare between the different available platforms.
Withdrawal Restrictions
If you are rushing to deposit money to your account, think twice! Make sure that you are comfortable with the fees, withdrawal lockup periods and any other restrictions that might pop-up and come into play. Keep in mind, some of the platforms such as Coinbase just permit deposits from the investors in the selected countries.
Insurance & Security Policies
One of the most important things that you need to consider while dealing with the cryptocurrencies is the security of the coins. It is mandatory for the crypto savings platform to offer a cold wallet or a cold storage facility in the bid to keep the assets of their clients secured. Insurance is not very much common in the cryptocurrency space. But it is also an important factor to consider and base your decision on indulging in any crypto platform. This is stated owing to the fact that some of the savings accounts insures their clients against the thefts and the losses arising from the hacks.
Simple Or Compound Interest
A couple of cryptocurrency exchanges such as NEXO offer a simple interest that is paid out daily to the users’ accounts. Nevertheless, if you require the interest to earn interest, you would have to choose the platforms like AAX Exchange that offer compound interest and that too calculated daily. You can also check out the best crypto interest account reddit or crypto savings account reddit threads for more information in the Reddit forum.
In this regard, we have often come across questions that people ask as to how much interest can you earn with a cryptocurrency savings account. To answer this, we can say that it all depends on the price of the cryptocurrency at that moment and the price of the same cryptocurrency on various platforms or the platform you chose to use.
Are Crypto Savings Accounts The Future?
Should you open a crypto savings account anytime? Well, it can be stated that cryptocurrency will trade the banking programs of the space and the crypto savings accounts are any other gains spend case proving its longevity. While most people would like to see a change in the crypto sphere, yet all of them are concerned with the security of their cryptocurrencies which is justified.
In a recent event, when asked about the future of the crypto savings account popularity, most people believed that the crypto savings accounts would convert to the default option for savings, while a third category of people (approx. 33%) stated that they would prefer the crypto savings account to be the default over the veteran savings accounts. The remaining 47% stated that they do not see the crypto savings accounts being the default option for savings accounts. However, they believe that crypto savings will definitely turn into mainstream.
And this belief of the crypto savings accounts turning into mainstream will supposedly be a fact sooner that you would relate. Of all the people that had mentioned that cryptocurrency savings accounts will surpass the veteran savings accounts by default, around 75% of factors in this can merely occur by 2030 and around one-third of these experts predict that it will likely be a norm by 2025.
Simplifying all of these, it can be stated that over 51% related to depositing their crypto sources into the cryptocurrency savings account in the bid to generate excessive returns.
Bottom Line
In this article we have focused the chief details that you are required to know before, during as well as after you select a cryptocurrency savings account. Additionally, we have explored the benefits of the savings account in the crypto space that is helping the crypto savings account popularity to gain momentum surpassing the traditional bank savings account and what you would have to look for while considering the best platforms for saving your digital assets.
While the bank savings account offers alluring interest rates to the client, we have already observed that the cryptocurrency savings account offers far more enticing simple and compound rates to its clients. You would also find the best stablecoin interest rate in some of the platforms. Additionally, there are some disadvantages that you must not overlook. Take into account all of these factors and discussions to help you get started.
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