As an investor, it is difficult to find great results from traditional banking products such as savings accounts. Fortunately, the crypto industry has matured and now offers low -risk investment products. Many of these products are involved stablecoinswhich is a blockchain-based token with a fixed price for fiat currency (usually US dollars).
The largest Stablecoin by market cap is Tether (USDT); here’s how you can make the most out of it.
|Blocks||Up to 7.25%||Up to 7.00%||Up to 7%||Up to 7%||Up to 3%|
What is USDT?
USDT is a stablecoin digital currency issued by Tether Limited, a company launched in 2014. USDT has a price peg in U.S. dollars based on a 1: 1 ratio. It is held on the Ethereum blockchain as an ERC-20 token.
Tether claims that the USDT is fully backed by reserves that include U.S. dollars, cash equivalents, other short -term deposits, and commercial paper. The latest proof report was released by MHA Cayman, confirming that USDT tokens are fully supported.
At the time of writing, USDT’s market cap exceeds $72 billion, putting it in the top 3 largest cryptocurrencies after Bitcoin and Ethereum. Stablecoins play an important role in the crypto industry, bridging the gap between blockchain and traditional finance.
Why Are USDT Yields High?
The yields provided by traditional savings accounts hover close to 1%, so how come USDT rates are higher even with the DeFi protocol? This is a good question because USDT has a price pegged to the US dollar, reducing the risk of volatility to zero.
Nexo, BlockFi and others offer better rates due to their unique business model where users lend cryptocurrencies to borrowers who are willing to pay higher rates. The latter is ready to use crypto as collateral, which is not possible with traditional banks. Thus, the growing demand for loans against crypto collateral affects interest rates.
USDT: Staking vs Lending
Staking and borrowing are two ways for investors to profit from crypto ownership without selling it. Traditional savings accounts cannot produce significant results in the current low interest rate environment. Fortunately, investors can use stablecoin like USDT for staking and lending.
The main difference between staking and lending is that the former requires users to rent USDT to a blockchain or crypto platform in exchange for rewards, while USDT lending requires them to rent funds to borrowers to earn interest.
USDT Loan Platform
If you want to generate high returns while reducing the risk of volatility, a centralized lending platform is the ideal choice. They operate similarly to traditional online credit services or banks. They will ask you to go through a KYC (know your customer) verification procedure before your account is approved.
We selected three of the most trusted credit platforms that support USDT and give high results:
BlockFi, which has been operating for five years, is one of the most popular lending platforms. One of the main products is BlockFi Interest Account (BIA), which allows investors to earn interest from crypto. The interest is earned daily and paid monthly. Many beginners like BlockFi because it has no minimum balance requirements.
The USDT stock earned an APY value that could reach 7.25%. In fact, fixed interest (which is updated regularly) depends on the BlockFi Interest Rate as follows:
- Tier 1 – USDT stocks lower than 20,000 come with an APY of 7.25%.
- Tier 2 – USDT deposits between 20,000 and 5 million USDT have a 6% APY.
- Tier 3 – USDT deposits exceeding 5 million provide 4.5% APY.
BlockFi offers a separate, personal yield products for high net worth individuals (HNWIs), who can get custom rates by negotiating with BlockFi. Usually, the duration of the loan is between one and six months.
BlockFi allows one USDT withdrawal per month for free, after which the user has to pay a withdrawal fee.
Another popular crypto credit platform is Nexo, was founded in 2017. Currently, the platform offers a 10% APY on USDT deposits. If you choose the NEXO token reward, the platform’s original token, you will get a higher APY. These are some of the highest interest rates on the market today. We also love Nexo’s intuitive interface, which can make a difference for beginners.
Retail and institutional investors choose Nexo because of its daily payouts and flexible income. Also, deposits are backed by $375 million in insurance coverage through BitGo and Ledger.
Using NEXO tokens not only provides better interest rates but more free crypto withdrawals and other perks.
Pros and Cons of Lending Platforms
|High returns – Crypto credit platform provides the highest yield on USDT deposits.||Centralized – because this is a centralized platform, you need to transfer custody of the USDT (private key) funds.|
|Cheap fees – generally crypto credit platforms charge minimal fees. For example, Celsius claims to have no cost.|
USDT Lending on Exchanges
You can also earn interest on USDT loans with centralized crypto exchanges and platforms. It usually uses funds to lend to traders who engage in margin trading. As a rule, you should lock USDT for a specified period of time. Here are some established crypto exchanges that support USDT lending:
Binance is the largest crypto exchange by trading volume. Since its inception in 2017 as a spot exchange, it has grown into a diverse ecosystem that also offers futures and options trading, a launchpad, liquidity farming, staking, and payment options, among others.
One of the main products is Binance Entuk, which is a one-stop solution for earning interest, including interest in USDT. The APY on USDT flexible deposits is a generous 10.00%, although the rate declines drastically with higher deposits. Thus, if you deposit more than 2,000 USDT, you should expect an APY of only 3.00%.
Another crypto exchange that arrived in the middle of the ICO (initial coin offering) boom in 2017 is Kucoin, which has accelerated its expansion only recently. Kucoin you latest funding round completed in May 2022 worth $10 billion.
Kucoin support USDT credit so users earn interest. However, there is a trick – Kucoin allows users to lend directly to partners, who decide the interest rate themselves. Therefore, APY figures can range from 1% to over 700%. It’s not a typo, but there’s a catch. Users lend their USDT holdings only for a period of 7, 14, or 28 days, and typically the higher the APY, the lower the required deposit. Thus, 700% APY for a 20 USDT deposit is not a big deal.
Alternatively, Kucoin offers Earnings products, which provide stable profits with professional asset management. The APY for USDT deposits in this case reaches 2.67%.
Founded in 2016, Crypto.com has become one of the biggest crypto brands thanks to various high-profile partnerships, especially in sports. The platform provides exchange, non-fungible token (NFT), payment, and credit services to more than 50 million users worldwide. It offers $750 million in insurance coverage for all assets. In 2021, the company partnered with Visa to complete transactions in the payment network.
At Get Crypto the product supports USDT and gives an average APY of 6% for three-month locked-in deposits. You can choose from flexible and fixed-term deposits, but the former gives lower results. Interest rewards are paid weekly.
Pros and Cons of Loans in Exchanges
|Diverse ecosystems – a large crypto exchange combines all forms of crypto operations that are just a few clicks away.||Centralized -crypto exchanges keep your funds in captivity, meaning you don’t have full control over your funds.|
|Produce below – most crypto exchanges offer lower yields compared to crypto lending platforms.|
USDT DeFi Lending
If you want to have full control over your funds and not share your personal information with anyone, you can opt for the Decentralized Finance (DeFi) loan protocol. DeFi is one of the most important trends in the crypto industry, as it allows users to access financial services that are managed by algorithms and supported by a blockchain rather than managed by a centralized entity.
The two most popular loan protocols are:
Aave is the second -largest DeFi protocol, with a total value locked in value (TVL) of close to $ 8 billion. Stablecoins plays a leading role in Aave, accounting for over 30% of all assets deposited.
The interest rate for contributions with USDT liquidity is 2.90%.
Aave’s direct competitor is Compounds, which has a $ 4 billion TVL to date. The loan protocol sparked DeFi’s frenzy in the summer of 2020, when it launched its government tokens.
The USDT also plays a major role here, with the APY on USDT deposits entering at 2.20%.
Pros and Cons of DeFi Lending
|Decentralization – The DeFi protocol is implemented with an algorithm, which reduces the possibility of human error. Also, they do not require KYC/AML verification from the user, who has full control over the funds.||Returns below – The DeFi credit protocol offers lower rates compared to its centralized counterparts.|
|High cost – some DeFi protocols, such as those built into Ethereum, come with high gas costs. However, the list of cheap alternatives built on Avalanche, Polygon, and other blockchains is growing.|
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