Every day a new crypto success story trends making other people adopt cryptocurrencies. With such increasing demand, the crypto industry is evolving, providing more opportunities to its users to make money. Crypto lending is an excellent option when looking for investment in the crypto industry. However, being new in the sector, users must have a clear understanding so that they do not have to face any loss.
Here, in this article, we have provided step-by-step instructions for starters to survive in the rapidly growing crypto lending world.
So, keep reading!
What is crypto lending?
Nowadays cryptocurrencies are very popular and there are many types of them. They work with their own mechanism and before investing you should explore each of them. Centralized lending, Margin lending, and Crypto lending tend to be the most optimal versions. Crypto lending is a process that allows investors to earn passive income in the form of interest payments or crypto dividends by lending out their cryptos to borrowers. They remain owners of their assets. Investors have the option to lend cryptos or stable coins.
Crypto lending is far different from traditional banks in many aspects such as fast and flexible loans, no credit score requirement, etc. There are the reasons behind the rapidly growing lending sector.
Step by step Instructions for starters in the crypto lending sector
Crypto lending may be challenging for beginners because of a lack of knowledge. But no worries, the following are the instructions which can help to be successful in this sector.
1-Choose a right cryptocurrency
It is very important to decide which currency you should invest in. At this point, it is worth mentioning that Bitcoin is not the only investment option to make money. There are many other cryptos that are performing so well and have huge return potential.
Therefore, before making investments blindly, users must search about other cryptos present in the market and their return potential.
2-Choose a reputable crypto lending exchange
A crypto lending platform takes care of all transactions in the crypto lending process.
The experience of a user mainly depends on the crypto lending exchange platform he is using. Therefore, it is highly crucial to choose the right platform. The platform must be trustworthy, and well-reputed. Check the history and users’ feedback about its services. Shortlist 3-4 different platforms and choose the one that best meets your investment demands.
3- Invest wisely
Being a starter, a user must know how much money to invest into crypto lending. It is always recommended to avoid putting all money into crypto and invest that much you can afford to lose. The reason is the crypto market is highly volatile and involves high risks.
Start with a small investment so that you can also learn without fearing much about investment loss.
4- Your investment should not be based on FOMO
Many people jump into a crypto lending investment because of fear of missing out (FOMO) and they invest blindly, resultantly they end up losing their money. So, in the start, users must learn about the ecosystem by small investment, educating themselves, learning from the experiences of others, etc.
5- Choose to diversify your lending portfolio
Being new in the crypto lending industry you must know that cryptos are not the only option to invest in crypto lending. However, crypto lending involves both crypto coins and stable coins. The interest rate for cryptos can be up to 3% to 7% whereas, for stable coins such as Binance USD, etc., it can be up to 17%.
It is because cryptos are highly volatile and if prices go down and investors will receive lower interest payments and vice versa. However, in the case of stable coins volatility risk is lower, making them preferable.
6- Extended lock-up period can help
Different lending platforms offer different lock-up duration. Some platforms allow withdrawing funds whenever the investor wants. However, other platforms have fixed duration such as 1 to 3 months. The longer the lock-up period investor will choose, the higher will be the interest rate.
For example, on Crypto.com the interest rate on locking-up stable coins for one month is 8% and for 3 months, the interest rate will be up to 12%.
Crypto lending is not complex unless one is willing to learn. However, it can be risky if you do have the right knowledge. Therefore, being a starter, try to learn as much as possible before jumping into it blindly. The instructions mentioned in this article can help reduce risk and increase the chances of your success.