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So you’ve made an investment in Ethereum (ETH-USD), congratulations! You’ve joined the growing list of almost 200 million accounts worldwide.
Perhaps you are waiting for The Merge later this year as a price catalyst or have longer-term optimism for the coin. In my portfolio, it’s a must-have – a true blue chip cryptocurrency to hold along with Bitcoin (BTC-USD).
Now that you have ETH, why not put it to work for you? Can the prudent investor find a safe and reliable way to earn rewards while holding the coin?
Crypto reward platforms provide liquidity to other institutions, charge them interest, and share some yield back with the investor. Later in this article, I’ll compare some of the leading exchanges that offer services for ETH.
Current Market Conditions
It’s been a challenging couple of months. A perfect storm of difficult macro conditions with the Fed increasing rates and a major crisis in crypto have tanked prices. Since April, almost a trillion dollars have been shed from the global cryptocurrency market cap.
The Terra Luna disaster, where the not-so-stable-stablecoin Terra (UST-USD) and companion token (LUNA-USD) have basically gone to zero, have given a black eye to the whole industry. About $60 billion of value between the two coins has evaporated like morning dew in the summer sun. In my recent article, USCoin: How To Earn 6-12% Interest Safely With Stablecoins, I did warn my readers to stay away from UST. No algorithmic stablecoin has succeeded long term. Some coins may eventually crack the code but they are now too risky for the prudent investor.
Fun (or bizarre) fact: Billionaire investor and CEO of Galaxy Investment Partners Mike Novogratz got a Luna tattoo just months before its meltdown to zero. He recently said, “With hindsight, things always look clearer. My tattoo will be a constant reminder that venture investing requires humility.”
Humility and patience are key attributes when investing in crypto – but so is conviction. Major drawdowns occur regularly. Bitcoin has been declared dead 449 times. The investor’s core beliefs will be tested when negative news abounds and prophets of doom are at their loudest.
Ethereum is still the premiere open-source blockchain software protocol that enables instant, permissionless global value transfer through smart contracts. It still has the largest network effect with the most developers and tools, DeFi protocols, Layer 2 solutions, and bridges being constructed into it. It is the clear leader and economic nexus of decentralized finance. ‘Nuff said.
Risks on Yield Platforms
One of the primary risks for the investor when depositing coins on an exchange or platform is security. There’s always the possibility of a breach where coins are stolen, but this same risk exists for any centralized exchange whether it be Coinbase (COIN), Kraken, FTX, etc. As far as I know, none of the platforms discussed below have lost coins due to security exploits.
Crypto platforms have much less regulation than typical banks and are not required to offer insurance. Securities and Exchange Commission chief Gary Gensler has taken enforcement action against BlockFi, one of the biggest interest-providing platforms.
As of February 14, 2022, the BlockFi Interest Account is no longer available to new US clients and existing US clients with Interest Accounts are unable to transfer new assets to their accounts. BlockFi is working with the SEC to develop an approved crypto interest product for US clients, but timing is TBD.
Celsius Network (CEL-USD) also restricts their Earn account for US clients. After April 15, 2022, all users can earn interest on funds already deposited, but only accredited investors may add to funds in the interest account.
Instadapp Lite and Lido Finance are the only Decentralized Finance (or DeFi) smart contract apps on the list. Centralized exchanges handle many of the complexities of DeFi that are exposed with these apps, but the tradeoff is generally lower rates of return. For example, Abra yield is 2.65% while Lido is 4.0% and Instadapp Lite is consistently over 7%.
From the Lido site:
When using Lido to stake your ETH on the Ethereum beacon chain, you will receive a token (stETH), which represents their ETH on the Ethereum beacon chain on a 1:1 basis. It effectively acts as a bridge bringing ETH 2.0’s staking rewards to ETH 1.0.
The “stETH” token can be freely moved and traded at will. The price of stETH relative to unstaked ETH is expected to be volatile until Phase 2 starts. When Ethereum 2.0 Phase 2 starts you can redeem stETH to ETH tokens.
The stETH token is meant to closely track the price of ETH but lost its peg during the Terra Luna crisis. The Lido team has taken measures to improve the liquidity around the stETH:ETH peg. The current discount is still about 2%.
Both apps take a 10% commission which is already deducted from the interest percentages shown below.
DeFi investors are strongly recommended to take the time necessary to fully understand the mechanisms and unique risks of Lido and Instadapp Lite.
Survey of Platforms
Although some exchanges offer higher rates if the investor buys and holds loyalty tokens, I don’t recommend it. Token buy-in can be expensive, they can lose value, and selling can be difficult. This review will focus strictly on the base ETH rates offered on deposit without any extra commitments.
Along with the interest rate, important considerations are: the withdrawal limits, any fees, and whether the platform can link with traditional banks for ACH transfers. If exchanges structure the interest rate into tiers based on the amount deposited, they are included below.
Here are the reviewed platforms in alphabetical order. Please note these rates are current at the time of writing but will change with market conditions.
Abra (app only for transactions, website for general info)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
2.65% no tiers |
$20,000 ACH per day $10M in crypto |
ACH bank transfers are free. Network fee for crypto transactions | Yes |
BlockFi (website and app)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
Tier 1 3.00% (0-1.5 ETH) Tier 2 1.50% (>1.5-5 ETH) Tier 3 0.25% (>5 ETH) |
$25,000 ACH per day $1M in crypto per 7 day period |
ACH bank transfers are free. One free crypto withdraw per month, $50 each after that. | Yes |
Notes: BlockFi is not currently accepting new US customers, but has a special program for high net-worth ($3M) clients.
Celsius Network (website and app)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
Tier 1 6.00% (0-2 ETH) Tier 2 4.0% (2-25 ETH) Tier 3 3.52% (>25 ETH) |
$600,000 per 24 hours | No fees | No |
Note: Celsius is currently only allowing accredited investors to add funds.
Crypto.com (app only for transactions, website for general info)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
3% with 3-month lock-in term 1.5% with 1-month term 0.5% with no term |
ACH $100k per day, $500k month. Crypto is the dollar equivalent of 10 BTC per 24 hours. | ACH bank transfers are free. Crypto is $25 per withdrawal | Yes |
Hodlnaut (website and app)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
4.20% no tiers |
Unknown | One free per month, $10 each after first | No |
Note: Hodlnaut is based in Singapore
Instadapp Lite (website)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
7.65% no tiers |
None but withdrawal could be ETH or stETH | 0.01% exit fee | No |
Note: Instadapp is a smart contract DeFi site
Lido (website)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
4.0% no tiers |
None but withdrawal is made in stETH | none | No |
Note: Lido is a smart contract DeFi site
Vauld (website and app)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
4.6% base, 6.7% with lock-in minimum of 30 days (can opt-out any time) |
No limits | Variable network fee | No |
Notes: Vauld is based in Singapore. Signup can be done with a Coinbase account because Coinbase Ventures is an investor.
Voyager (OTCQX:VYGVF) (app only for transactions, website for general info)
| Interest rate | Withdrawal limits | Withdraw fees | Bank link? |
|
Tier 1 4.50% (0.5-20 ETH) Tier 2 3.0% (20-50 ETH) Tier 3 1.5% (>50 ETH) |
$25K for ACH per day $25K crypto per day |
Variable network fee for crypto. | Yes |
Conclusion
I have used many of these services with good success. Those with ACH link capabilities make it easy to move money into and out of bank accounts as needed.
Important – with any of these platforms transfer only a small amount of ETH first and confirm that transaction before moving larger amounts.
As always, do your own research but seriously consider these high interest options for your ETH holdings. If you have conviction to hold during these rough market times, you can benefit by adding more to your stack.
