What are the Main Factors that Need to be Analyzed Before Starting to Lend Your Cryptocurrency?

What are the Main Factors that Need to be Analyzed Before Starting to Lend Your Cryptocurrency?

The world of blockchain and cryptocurrency has gained massive popularity in recent years. Crypto enthusiasts are always looking for new strategies to make money with cryptocurrencies. The crypto industry offers several investment opportunities. Crypto lending is one of these opportunities whose adoption is rising these days. In this article, we will discuss crypto lending and the factors that need to be analyzed before starting to lend cryptocurrency.

Keep reading!

What is crypto lending?

Nowadays you can find many types of cryptocurrencies where you can invest. Peer-to-peer lending, investing in stocks, or crypto lending gives you the opportunity to have passive income easily. Each of them has different working mechanisms and before choosing you should explore each of them. For having a general idea of what is crypto lending, let’s understand how crypto lending works and what kind of benefits it has. Crypto lending is an investment strategy that allows investors to lend their digital assets to borrowers. In exchange, they earn interest payments. In this way, they can earn passive income with their idle cryptos. Crypto lending enables investors to increase the value of their assets while holding them with no plan to sell them sooner. Many cryptocurrency exchanges offer the service of crypto lending.

Factors to analyze before starting crypto lending

Crypto lending has profit potential, but it has some risks as well. Therefore, you must analyze a few factors before stepping into the crypto lending sector.

1-Crypto to select

The first thing you need to analyze is which digital asset you can invest or should invest in. In crypto lending, you can choose to invest in crypto as well as stable coins. People generally think that Bitcoin is the only cryptocurrency that can bring profits, but many other cryptocurrencies are globally available with excellent return potential. Cryptocurrencies are highly volatile, which can bring both considerable profit and loss, but stablecoins do not carry this risk.

Therefore, you must search for options in cryptocurrencies and can also choose to invest in stable coins for lending.

2- Interest rate

Earning interest payment is undoubtedly your main goal when lending your cryptos. Therefore, it is essential to analyze how much interest payment you can get from lending your digital assets.

If you choose to lend cryptos for lending, the interest rate is 3% to 7%. It is much higher for stable coins, up to 17%. You will then decide which interest rate you will prefer. It will also help you to decide which digital asset you will invest in.

4- Increase your profit

Let’s say you have earned a profit by lending your assets. But is there any option to increase this profit also? The answer is YES! For example, you can use your earnings to invest in a platform other than the one you won from. It can help you increase your profits by making more money on them.

Therefore, you also must analyze the methods to increase the profits to get an idea of how much maximum you can make out of this sector.

3- Exchange platform to select

Crypto lending platforms take care of all transactions during the entire lending process. They charge some fee for their service. They work online and also offer certain rewards to users. In crypto lending, your experience will largely depend on which lending platform you are using. Therefore, you must select the right platform.

There are many crypto lending exchanges out there with different policies. You must analyze their policies, their history, and public review about these platforms. Choose the best among them (right and trustworthy), the one meeting your requirements.

Some examples include BlockFi, Binance, Nexo, Celsius, CoinLoan, YouHodler, etc.

4- Reduce the risks

Crypto investments always come with risks. But you need to analyze how you can reduce the chances of loss in your crypto investment. It must be before investment so that you can apply those methods in time.

Some tips include never putting all your money in one coin; instead, try diversifying your portfolio. Set a profit and loss target so that you know before the time when to stop it any mishap happens.

5- Stop! Check your investment

Many people invest in cryptocurrencies blindly because of fear of missing out. Stop and check why you are investing in cryptos. If it is also because of getting your name in crypto investors, then stop. Don’t rush; instead, first, learn about the market. Learn how it works and why one is earning, and the other is losing.

It is imperative to analyze why you are investing in cryptos. Choose to invest only when you have enough information. Start with little and keep learning.

Final words

Cryptos are here to stay so does crypto lending. The only way to survive and earn from this industry is always your thorough homework about things and careful decisions. Learn from the experiences of others. Never put all your money at once in the beginning. Keep on analyzing the crypto market, notice each change and act accordingly.

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