Earn interest on crypto and get a free bag of cat food. Every month. Guaranteed. Like clockwork. This article will show you how. Just stick with us while we explain this latest crypto-scheme.
The people working in the bowels of the cryptocurrency swamp are pushing savings accounts that can earn up to 12% interest. It’s simple: Deposit your bitcoins and earn interest. No tricks. No secret sauce. No financial somersaults. You just need faith. Buckets of faith. But if you’re invested in the cryptocurrency milieu, you must already have plenty of faith in reserve.
Free Cat Food Every Month
After sifting through the various cryptocurrency savings account offers, we think we’ve found a good one. A deposit of $1,000 will earn you $8.60 in interest each month – enough for a bag of premium cat food. Why not go for it? That bitcoin sitting in your crypto wallet or on an exchange isn’t earning even a single satoshi. Except there’s a few problems you should be aware of. The biggest problem is that you’re not guaranteed anything.
So, how do we solve the conundrum of free cat food versus you’re not guaranteed anything? We don’t. You do.
First, did you really think that these savings accounts carry no risk? Of course they do. But what’s risk compared to earning free pet food every month for your furry friend? It’s almost altruistic to dive in and go for it. Besides, risk is part of the reason we buy cryptocurrencies, right? Of course.
And it sounds like a bit of fun to earn free pet food every month with cryptocurrency. Try that with fiat dollars. Does any bank in world offer you a free bag of cat food if you stick $1,000 into a savings account? No! Only cryptocurrency banks offer this.
Besides, marketing this cryptocurrency interest scheme as free cat food is much sexier than earning $8.60 interest. Yes?
Okay, let’s get the bad part out of the way before the free cat food strategy is laid out. Here are four primary reasons you shouldn’t do this:
Searching the Jungle for Your Bitcoins
1. If the CEO of the company decides to take off with your deposit and go live in the Costa Rica, good luck searching the rain forest for your cryptocurrency.
Uncle Sam will show you no pity. The FBI will laugh at you. Your babies crying because you lost their milk money on a cryptocurrency crackpot scheme will be your fault.
Quite simply, these savings accounts are not backed by the federal government FDIC, like a bank is. There’s no deposit insurance. Not a dime. That means you can lose the entire principal you deposit, plus the interest earned.
2. These bitcoin savings accounts up for offer are somewhat convoluted and complex. There’s that word again – risk. You need to carefully read the terms for these savings accounts. What one cryptocurrency account may offer, another will not.
3. These savings account are subject to varying amounts of fees, which can eat into your interest payments.
4. You don’t have a say on whom your cryptocurrency may be lent to.
Meet the Howling-Mad Margin Traders
You need to understand what’s going on with these savings accounts. In essence, these purveyors of bitcoin savings accounts are essentially acting as middlemen to loan out your cryptocurrency to borrowers. You are the bagman. You deposit your bitcoins, and these bitcoins are loaned out to borrowers by these companies.
Your crypto-keys are given to borrowers who then tap into your bitcoin deposit to use on whatever project they wish. In other words, you no longer control your bitcoin money. The borrower controls your bitcoin deposit. Then you are paid a monthly interest rate from the borrower. The lending company will take a cut from the interest rate for themselves as profit.
Also be aware that these companies may loan your cryptocurrency deposit to howling-mad margin traders, not necessarily to a Girl Scout troop setting up a cookie booth at the county fair.
Some loans may be made without a credit check. So that fellow who knows one neat trick to dethrone Microsoft by next Friday might be given your bitcoin.
Other people could borrow against your deposit to buy some new cryptocurrency like Satoshi Hacker Coin. Then if the cryptocurrency crashes, you may never see your money again.
There’s a ton of little signposts to check out before dropping your cryptocurrency into these savings accounts.
These crypto savings accounts may impose various restrictions on your account. For example, with a normal savings account at a fiat bank, you can withdraw money up to six times each month. A crypto savings company may forbid you from withdrawing your principal for months. Each company will have different rules.
Interest yields will range from 2 to 12 percent, depending upon the lending company. These interest rates are significantly higher than a traditional fiat bank, which makes these crypto-lending companies extremely attractive as a savings alternative.
The interest you earn on your crypto-savings will not compound. So to profit from your interest gain, you need to withdraw it each month. You can also let the interest sit in your account, thus, increasing the amount of your cryptocurrency balance at the company. But why? If the crypto-company goes under, you lose everything. May as well withdraw the interest payment each month.
The interest rate you earn depends upon the type of cryptocurrency you deposit with the savings company. As it stands now, crypto-savings accounts based on stable coins pay more in interest than cryptocurrency deposits.
(Stable coins are valued and connected to an external source like US dollars or gold. They are designed to provide some measure of stability and security as opposed to the volatility of cryptocurrencies like Bitcoin or Ethereum.)
For example, the company BlockFi will pay 3.2% interest on one to five bitcoins deposited into an account. On the other hand, BlockFi will pay 8.6% interest for deposits in stable coins. So in this example, a depositor will earn more than twice the interest from stable coins than from Bitcoins at BlockFi.
Also be aware that companies may allow you to choose your interest payment in either stable coins or cryptocurrencies. Read the fine print.
Be aware that the rules for these savings accounts will vary from company to company. As a reminder, these crypto-interest accounts are not backed by the federal government deposit insurance for losses.
Some companies do offer private insurance to protect your deposit. Others are completely without insurance.
Fees can pile up when withdrawing principal.
Always do your research on the financial stability of a company. Also check how the company stores your deposit. Cold storage is always better than online storage. A new company may come up short on security measures, putting your deposit at risk from hackers.
These crypto-savings companies are fairly new in the cryptocurrency world and should be approached with caution. To call this cryptocurrency savings scheme adventurous and risky is an understatement, but that’s part of the allure of holding cryptocurrencies.
With these savings accounts, you’re betting that the company won’t go bankrupt or get hacked. It appears that some of these companies are trying to ensure that this doesn’t happen. However, if you already hold a good amount of cryptocurrency, you know about the risks involved and crypto-savings account may be worth the risk. Look at the fees, any entry barriers and the manner in which interest is paid.
Okay, let’s get your free bag of cat food as promised.
Find Your Free Cat Food Now
If you have $1,000 set aside in your annual household budget for Starbucks, pot and gambling, restrain yourself and dump that $1,000 into a cryptocurrency savings account at BlockFi.
What is BlockFi? BlockFi is a financial company that offers loans using cryptocurrencies. You can read about BlockFi here.
First, don’t send Bitcoins to BlockFi. BlockFi only pays 3.2% interest on Bitcoins, enough for a cheap bag of cat food at the Dollar Store. Your cat wants better than that.
Send BlockFi stable coin instead, such as USD Coin (USDC). You can swap your Bitcoin for USDC at just about any cryptocurrency exchange. A stable coin account pays 8.6% at BlockFi. BTW, these rates are subject to change at any time.
You can avoid swap fees charged by cryptocurrency exchanges by working directly with BlockFi.
According to BlockFi, the company will purchase stable coin for you with your US dollars. Then the stable coins will be used to create your savings account at BlockFi. The company allows one free bag of cat food withdrawal in stable coin each month.
Here’s what you do:
1. Send BlockFi $1,000 in US fiat dollars.
2. BlockFi will convert those dollars into stable coins (USDC) and deposit them into your BlockFi savings account.
3. Each month, BlockFi will send you $8.60 interest.
4. You are allowed one free withdrawal each month.
5. Withdraw that $8.60 and send it to your fiat bank account.
6. Go to the pet store and buy your free bag of cat food.
And with that, the age-old problem of where to find free cat food is settled: If you want a free bag of cat food each month, go with a cryptocurrency savings account.