Even in the current downturn, there are a plethora of opportunities in the crypto market for investors to continue generating income. Stablecoins are one asset that can provide substantial returns when utilized correctly. However, they are not all the same. Some stablecoins offer less risk than others.
In the last month, stablecoins have found themselves in the spotlight for all the wrong reasons. One, in particular, has proved that even stablecoins are subject to some degree of risk. The TerraUSD (USTC 3.95%) stablecoin recently lost its peg to $1. Unlike other stablecoins that hold a reserve of cash equivalents equal to the amount of stablecoins distributed, UST maintained its peg through a crypto-trading algorithm instead. It was an experimental strategy that ultimately proved that it could fail when markets became volatile. As a result, UST currently trades at only $0.02. This stablecoin lost nearly all of its value and purpose.
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Yet some stablecoins operate with more transparency and use traditional methods. Circle's stablecoin, USD Coin (USDC -0.01%), is quickly rising in popularity among investors for this reason. The company has been a vocal advocate for stablecoin regulation and for ensuring that their reserves are easily auditable.
This strategy makes USD Coin one of the least risky stablecoins in its class. And investors can use this to their advantage. There are a handful of exchanges that allow USD Coin investors to earn attractive interest on their holdings. While not completely risk-free, earning interest on USD Coin with a reputable crypto exchange is one way to continue to earn money in an unstable market.
Best exchanges to earn interest
Investors should be sure to use exchanges that are reputable and have a favorable track record. The exchanges below meet these criteria and offer higher yields than a regular savings account.
BlockFi is one of the largest and most popular exchanges. It was one of the first exchanges to offer customers interest rates on many cryptocurrencies like Bitcoin, Ethereum, and many more. Despite not being able to open new accounts to earn interest on these cryptocurrencies, investors can still earn interest on USD Coin. BlockFi offers a 7% interest rate and requires no minimum account balance.
Another well-known crypto exchange that investors can use to earn interest on USD Coin is Crypto.com. Unlike BlockFi, there is a one-month minimum deposit term. But account holders with less than $30,000 can earn up to 8%. Those with more than $30,000 can still earn a generous 4% return. Yes, the effective return is smaller for larger deposits -- Crypto.com's generous interest rates can be complex and counterintuitive sometimes.
The last exchange to make this list is Voyager. Investors can make between 6% and 9% interest on their USD Coin. Similar to Crypto.com, there are a few stipulations. The initial deposit must be more than $10 and the monthly minimum balance must be more than $100. Like Crypto.com, the rewards also grow smaller as with larger deposits. The minimal requirements and high interest rate make Voyager one of the best options to earn interest.
These aren't the only exchanges that offer interest on USD Coin, but they are among the most respected choices. The FDIC does not insure most crypto exchanges. This means that if an exchange fails, investors can lose all of their money. Making sure that the exchange you use is reliable is a great way to minimize risk. When combining this with the transparency of the USD Coin, these interest accounts can be a great way to make some extra profits in a volatile market.
