Avatar photo
By Daniel CreechFebruary 9, 2021

Now you can earn interest on your crypto


U.S. crypto exchange Gemini now offers crypto investors the ability to earn interest on crypto holdings.

Gemini is the crypto exchange created by the Winklevoss twins, famous for starting Facebook with Mark Zuckerberg back in 2003. 

Last week, the exchange launched a new program called Gemini Earn, which pays an interest rate up to 7.4% annual percentage yield (APY) on select cryptos.

As I’ll explain, this is a huge step forward for the crypto industry. In fact, Gemini’s Earn program pays much higher interest rates than any traditional saving account you can find at a bank. 

This interest program is the latest example of how the crypto space continues to expand and mature into a real alternative to the traditional financial industry. 

Gemini Earn is available to U.S. customers on all 26 cryptocurrencies on its exchange. 

This means investors can buy their favorite crypto and earn interest while they own it. The interest payments give customers an additional way to make gains… on top of the price appreciation that crypto holders typically aim for.

Gemini’s Earn program is a huge step forward for the entire crypto space. It puts crypto on equal footing with traditional banking services. In fact, the interest rates that Gemini is offering are much higher than anything you can find at a bank. 

According to bankrate.com, the average interest rate for savings accounts is 0.07%. That means you’ll get $7 of interest per year on a $10,000 deposit. That’s a dismal return.

By comparison, Gemini offers 3.05% interest on bitcoin (BTC) and ethereum (ETH), the two most popular cryptocurrencies. Most coins pay an interest rate in the 2% to 4% range. Filecoin (FIL) has the highest APY at 7.4%.

Put simply, cryptocurrencies like BTC and ETH pay an interest rate 40 times (40x) higher than the average savings account in the U.S. 

As you can see, it’s an attractive program… especially at a time when bank account yields are near zero. 

Interest is compounded daily and you can remove your crypto (plus any interest earned) at any time. Gemini says there’s no minimum balance and no transfer fees.

But the program comes with higher risk than a typical bank account. When customers place their crypto in Earn, it’s loaned out to institutional borrowers. They’re willing to pay the higher interest rate in order to fund projects and investment strategies.

The loans are unsecured, which is why the risk is higher. According to Gemini’s chief operating officer, Noah Perlman, Gemini relies on trusted institutional partners to help match the lender and borrower.

To help lower the risk, Gemini will conduct “periodic” analysis of each borrower’s cash flow and balance sheet strength.

Despite the slightly higher risk, it’s a very attractive program. 

Crypto investors tend to have a higher risk tolerance than the average investor. 

And for many investors who have bought bitcoin and plan on holding, why wouldn’t you want to earn additional interest on your investment?

More importantly, it’s the latest sign that crypto is ready to challenge the traditional finance industry. 

I’ve written about this idea repeatedly. With each passing month, more companies are adding bitcoin to their balance sheets. Electric car maker Tesla recently disclosed it bought $1.5 billion in bitcoin—joining a handful of other big, corporate bitcoin buyers, including MicroStrategy, MassMutual, Square, and even Fidelity.

We’re still in the early stages of crypto’s evolution. While the volatility is extreme, individuals and corporations are getting more comfortable with the idea of investing in crypto. 

As more corporations look to gain exposure to bitcoin… and more exchanges offer services like Gemini’s Earn program… much higher crypto prices lie ahead.

Avatar photo
Daniel Creech is a Curzio Research analyst with over a decade of experience. He writes on macro trends, large- and small-cap stocks, and digital securities. He’s a regular contributor to Wall Street Unplugged, Curzio Crypto, Curzio Research Advisory, and The Dollar Stock Club.
What’s really moving these markets?
Subscribe to access daily market updates and exclusive content
More about Digital Assets

Why Gen Z is captivated by crypto

Joe Davide shares Gen Z's perspective on stocks and crypto... what he's learned from the current bear market... his process for researching new crypto projects (and some of his favorites)... and why FTX's implosion proves we need regulation.

What we need for crypto to rally

Frank Holmes of HIVE Blockchain breaks down the FTX collapse... how he avoided massive losses from Celsius' bankruptcy... what we need to see for crypto to rally... and his upcoming crypto conference. Plus, the coming recession could last a while.

More from Daniel Creech