Crypto lending – Like any investment, you buy cryptocurrencies in hopes that their value will rise and later sell the coins. However, you can also borrow cryptocurrency from some Indian exchanges. There are two such cryptocurrency exchanges: Vauld and ZebPay.
What are the steps involved in crypto lending?
You can borrow up to 90 days through ZebPay. Based on the term you choose, you will receive a different rate of return. The annual return on Bitcoin, Ethereum, and Dai is up to 3 percent, and the return on Tether is up to 12 percent. Six varieties of cryptocurrencies can be used to lend.
According to Avinash Shekhar, Co-CEO of ZebPay, the crypto-asset exchange, the lending feature is designed to earn passive income HODLers (long-term crypto investors).
In Vauld, you can lend cryptocurrencies for up to 90 days. It allows you to lend in 30 variants of cryptocurrencies and earn interest in them. Bitcoin and Ethereum, annual returns can reach 6.7%, while on DAI and Tether, they can reach 12.68%.interest.
However, it is necessary to transfer cryptocurrency into an exchange wallet to earn interest as a lender. Exchanges cannot be linked with external wallets like MetaMask and Trust.
Upon maturity, the returns earned will be deposited together with the principal into your trading wallet.
The ZebPay exchange, for example, will credit your wallet with interest in bitcoin cryptocurrency, along with the principal if you lend a Bitcoin for three months.
Before maturity, you can withdraw this cryptocurrency. In the future, however, this could result in a penalty. ZebPay’s Shekhar tells us that penalties will be waived as long as it’s a new feature on their platform. If you opt-out before maturity, you won’t face any fees or penalties on Vault.
How does it work?
A passive return is possible for investors. Shekhar says that it increases the value of investors’ investments by letting existing crypto investments perform the work of appreciation. Gains from crypto’s price increase have been added to these returns.
It seems as if the shadow banking system is advancing with this new feature. NRP Capitals’ founder Rishabh Parakh says long-term investors may profit from crypto.
“ZebPay focuses on ensuring the security of its customers’ deposits and wallet data. Because of this, most of the coins on the exchange are stored in offline wallets. Shekhar says that this minimizes the risk of hackers. To minimize the risk of security breaches, funds are insured by international industry standards as well.
The risk of an exchange going bankrupt also exists when keeping cryptocurrency in a wallet on an exchange. Crypto investments have lost investors in the past during such instances.
Lending to exchanges results in interest income being locked in. When a lock-in feature is used, the price can depreciate, according to Giottus Cryptocurrency Exchange’s CEO, Vikram Subburaj. You must inform the conversation in advance if you want to withdraw prematurely due to falling prices. In addition, if you leave during the course, you will incur a penalty.
What are your thoughts on lending?
The exchanges are incentivizing investors to store cryptocurrencies in their exchange wallets by offering this lending feature. Sanghvi explains that the interest rates and complexity are lower in decentralized finance (Defi) since trading on the exchanges could be earned after a few clicks. As alternate changes have scope to the top-cap cryptocurrencies, he suggests that exchanges add multiple cryptocurrencies.