The opening of interest accounts in crypto is going viral in the market and investments are raining down on institutions.
Investments in accounts with interest earnings related to the crypto world are increasingly popular in the stock market. Despite the fact that the institutions that offer these options diametrically contradict the philosophy of Bitcoin, this matters very little to those who seek passive profits.
However, there are some points that investors should take into account before placing their capital in these accounts. One of the main ones is the volatility of these digital assets. Although it is true that Bitcoin has had an outstanding rebound during 2021, in the last 3 months it has gone through a dramatic correction.
This last point generates anxiety among potential investors and must be carefully analyzed. Among other factors, some negatives can be highlighted, such as the risk of centralization, commissions and balances. Among the striking aspects, one can name the variable rates, which are much higher compared to those offered by investments with fiat.
Why are investments in crypto accounts becoming so attractive?
The popularity of the most important of cryptocurrencies is becoming a phenomenon that many consider unstoppable. With that popularity come some unavoidable facts such as the desire of large investors to take advantage of the great returns that the world of digital currencies offers. In that sense, investments in crypto accounts to generate interest are becoming a very popular topic in the market.
It is important to note that some regulations in the United States and other countries generate a lot of uncertainty. In other words, the idea of volatility associated with crypto assets and the laws that are seeking to limit the scope of these, becomes a double risk motive. However, the capacity for return they offer is such that the number of investors who consider that the risk is worth it is increasing.
Thus, for example, Forbes points out that another decisive factor in the drive to take risk is the current economic context in the United States. “ Particularly in an economic environment where interest rates are artificially suppressed and many assets reach historic highs. In this scenario, the idea of generating passive income with high rates awakens the desire to invest in assets of various types, ”the post explains.
Among these types, investments in crypto accounts that generate interest stand out. As already highlighted, there are some positive and negative factors that could affect these investments and they must be taken into account. Some of them are:
The philosophy of cryptocurrencies, at least Bitcoin and many others, is eminently decentralizing. This means that they were born as a tool to evade state and financial controls on the right to economic privacy. Therefore, an investor committed to crypto theory will have to face the dilemma of putting their investments in centrally controlled accounts.
Thus, the institutions that offer these investment options are intermediaries. This violates the mantra ” not your keys, not your coins “. It should be noted that practically all of these institutions are subject to the Know Your Customer (KYC) policies imposed by the State.
Commissions and balances
A fact worthy of importance in terms of investments in crypto accounts of interest, are the transaction fees. After Coinbase was listed on the stock market, this fact has attracted attention. In simple words, although normal commissions in crypto can be low, doing them through centralized organizations is the opposite.
The focus of attention in this case, is located if you take a look at the traditional corridors. To become more competitive, many of them reduce their commissions as close to zero as possible. In that scenario, those presented by crypto investments can be surprising.
Low rate of return conditions
In what could be considered the most negative aspect of investing in crypto accounts, are the low returns. Although the requirements related to balances in cryptocurrency investments are usually low, the amount of deposits can affect the rates of return.
In some cases, the high magnitude of the amount of crypto assets in an investment account can generate low returns for the investor. Although it is not a general rule of thumb and highly dependent on the institution offering the options, it should not be lost sight of.
This is one, if not the greatest attraction of investing in crypto interest earning accounts. If you compare crypto rates with those of investments in fiat money or other forms of market assets, the latter pale.
In fact, it is one of the main magnets that attracts large masses of investors towards crypto options. Putting in capital and making quick and high profits at the same time is the most coveted dream of any investor.
However, you cannot look at this advantage in isolation from the previous points. Also, it should be noted that rates may change. In other words, interest rates can increase, decrease or be modified according to market conditions. The evolution of this factor forces investors to constantly check the type and magnitude of income they are receiving.
With all of this in mind, many capital owners and professionals are strategizing. What should be taken for granted is that risks are not a brake on investments, and the opening of crypto accounts is one more within the variety of the stock market.
Data to take into consideration
- The rise in popularity of cryptocurrencies has awakened the desire of many investors to get their share of the profits.
- Although crypto assets are associated with volatility, the high and fast profit margin they offer is tempting.
- In that sense, the proliferation of investments in crypto interest option accounts are going viral in the market.
- Along with this boom in accounts come some risks and benefits that investors should consider.
- One of the main limitations is the new quality of this type of options in the traditional market.