Important points:
Centralized crypto lending platforms like Nexo and Youhodler offer relatively high yields and low fees, but they come with a cost to store your funds. Centralized exchanges like Binance offer diverse financing and yield farming options for USDT, but with lower potential yields. DeFi lending protocols like Aave and Compound give you full control over your funds and often have no KYC requirements, but they can charge high fees.
As an investor, it can be difficult to find sufficient yield from traditional banking products like savings accounts. Thankfully, the cryptocurrency industry has matured and offers low-risk investment products. Many of these products include stablecoins, which are blockchain-based tokens priced in fiat currency (usually US dollars).
The largest stablecoin by market capitalization is Tether (USDT). Here’s how to get the most out of it.
USDT financing platform
A centralized lending platform is the ideal option to generate high yields while reducing volatility risk. These work similarly to traditional online lending services and banks. You will be required to pass a KYC (Know Your Customer) verification step before your account will be approved. We have selected three of the most reliable lending platforms that support USDT and offer high yields.
nexo
Another popular crypto lending platform is Nexo, which was founded in 2017. You can earn even higher APYs by choosing NEXO Token Rewards, the platform’s native token. These are some of the highest interest rates on the market today. We also like Nexo’s intuitive interface, which can make a difference for beginners.
Individual and institutional investors choose Nexo for its daily compounding interest payments and flexible returns. The deposits are backed by a total of $775 million in insurance coverage through partners including BitGo, Ledger Vault, and Bakkt.
Using NEXO tokens, you get many benefits such as better interest rates, higher yields, lower borrowing rates, free withdrawal of cryptocurrencies, and other benefits.
US customers are no longer accepted.
Click here to check current Nexo interest rates.
coin loan
Coinloan is a popular cryptocurrency lending platform launched in 2017. The platform is based in Estonia and was founded to pioneer the concept of peer-to-peer cryptocurrency lending.
Apart from cryptocurrency lending, Coinloan also offered users the opportunity to buy, sell, and exchange crypto assets using a built-in order book. The platform supports over 20 tokens, including USDT, with interest rates ranging from 4.95% to 12%.
Unfortunately, Coinloan’s business was severely affected by the 2022-2023 market crash. Withdrawal restrictions imposed by the platform led to litigation in Estonian courts, resulting in a bankruptcy filing in June 2023.
The process of returning user funds is ongoing and is being managed by a trustee appointed by the Estonian authorities.
Youhodlar
Like many other platforms, Youhodler was officially launched in 2017. The company was originally based in Cyprus. In 2019, Uhodler opened a second location in Lausanne, Switzerland.
The platform provides cryptocurrency payment solutions, secure wallets, cryptocurrency trading solutions, and cryptocurrency-backed lending services to customers in over 100 countries.
Youhodler Yield Account promises up to 15% APY on various cryptocurrencies and stablecoins including USDT. As of this writing, USDT has a healthy 6% APY.
The platform promises weekly payments and consistent earnings. Existing customers can purchase insurance protection through a pooled program backed by Ledger.
US customers are not accepted.
Click here to check Youhodler’s current interest rates.
USDT financing on exchanges
You can also earn interest on USDT loans using centralized cryptocurrency exchanges and platforms. They are typically used to lend funds to traders who trade on margin. As a general rule, you need to lock up your USDT for a predetermined period of time.
Here are some established crypto exchanges that support USDT lending.
Binance
Binance is by far the largest cryptocurrency exchange by trading volume. Since starting as a spot exchange in 2017, it has transformed into a diverse ecosystem that also offers futures and options trading, launchpad, liquidity farming, staking, payment options, and more.
One of the main products is Binance Earn, a one-stop solution for earning interest, including USDT interest. USDT Flexible Deposit has a generous APY of 10.00%, but the rate drops significantly for larger deposits. Therefore, if you deposit more than 2,000 USDT, your APY will only be 3.00%.
Click to see the current Binance interest rate.
Crypto.com
Founded in 2016, Crypto.com has become one of the biggest cryptocurrency brands thanks to several high-profile partnerships, especially in the sports sector. The platform provides exchange, non-fungible tokens (NFTs), payments, and lending services to over 50 million users worldwide. The company provides $150 million in insurance for all assets under a direct insurance policy partnership with Arch Underwriting. The company partnered with Visa in 2021 to settle transactions on the payment network. Users can apply for a Visa card with a wide range of exclusive benefits on the Crypto.com platform.
The Crypto Earn product supports USDT and offers up to 12% APY. Reward rates vary depending on the selected tokens, balance size, deposit period, and country of residence. You can choose between flexible deposits and term deposits, but the former has a lower yield. Interest rewards are paid weekly.
Click to see Crypto.com’s current interest rates.
USDT DeFi Lending
If you want complete control over your funds and don’t want to share your personal information with anyone, you can also choose decentralized finance (DeFi) lending protocols. DeFi is one of the most important trends within the cryptocurrency industry as it gives users access to blockchain-powered financial services that are run by algorithms rather than managed by a centralized organization. is.
Advantages and disadvantages of lending on exchanges
Abe
Aave is the second largest DeFi protocol with more than $10.4 billion in total value locked (TVL). Stablecoins play a leading role at Aave, accounting for approximately 25% of all deposited assets and approximately $120 million of the total market capitalization of $486 million.
The interest rate on donations with USDT liquidity is well above 1%. This is much lower than the interest rate, but there is no lock-up period or minimum balance. (Typically, there are transaction fees for transferring money in and out.)
Click to see current Aave interest rates.
complex finance
Aave’s direct competitor is Compound, which has a TVL of $2.36 billion as of this writing. This lending protocol sparked a DeFi boom in the summer of 2020 when it launched its governance token.
Compound V2 offers an excellent APY of 3.72% on USDT financing. Approximately $183.6 million worth of USDT is locked on the platform by lenders, with a utilization rate of 79% at the time of writing.
Click to see the current compound interest rate.
What is USDT?
USDT is a stablecoin cryptocurrency issued by Tether Limited, a company founded in 2014. The price of USDT is pegged to the US dollar based on a 1:1 ratio. It is hosted on the Ethereum blockchain as an ERC-20 token.
Tether claims that USDT is fully backed by US dollars, cash equivalents, other short-term deposits, and commercial paper reserves. MHA Cayman has released its latest certification report, confirming that the USDT token is fully backed.
At the time of writing, USDT has a market capitalization of over $108 billion, making it one of the top three cryptocurrencies after Bitcoin and Ethereum. Stablecoins have played an important role in the cryptocurrency industry, bridging the gap between blockchain and traditional finance.
What is USDT used for?
Stablecoins like USDT were developed because traditional tokens like Bitcoin and Ether are too volatile to be used in a wide range of scenarios that require low volatility.
For stable transactions
Day-to-day transactions, money transfers, and other payments require a relatively stable currency. Cryptocurrencies are highly volatile and therefore not well suited for such transactions. USDT is designed to maintain a stable value pegged to the US dollar, making it a great alternative for trades that require low volatility.
As a bridge between fiat currency and virtual currency
Buying cryptocurrencies with USD or other fiat currencies is not easy. Many decentralized exchanges do not support credit cards or other traditional payment methods. USDT can serve as a bridge in such situations. You can easily buy USDT using fiat currency and use your stablecoin on various exchanges.
As a temporary store of value
Price fluctuations during periods of high market volatility can have a significant impact on the valuation of your crypto assets. In some situations, converting volatile tokens to USDT may be a wise option until market conditions improve. Although USDT is not as stable as fiat currencies, it is significantly better than other cryptocurrencies.
About virtual currency margin trading
Margin trading between different cryptocurrencies requires stable, highly liquid tokens that can be quickly deployed and traded seamlessly across different exchanges. USDT ticks all the boxes and is widely used by crypto margin traders to expand their positions.
as part of a trading pair
Traders often want to minimize volatility risk. Direct trading between two cryptocurrencies is convenient, but it usually comes with a high level of volatility. USDT offers an alternative option. Use trading pairs that include USDT as the base currency. Many exchanges offer trading pairs that include USDT as one of the cryptocurrencies.
About cross-border remittances
Cross-border transactions through traditional banking networks often incur high transaction fees. It is also not viable in certain parts of the world due to lack of proper banking infrastructure. USDT allows users to transfer funds around the world at significantly lower costs, even in areas where traditional banking services are not available.
Why is USDT yield so high?
According to the FDIC, traditional savings accounts offered a yield of approximately 0.46% (without interest rate cap adjustment) in 2024. So why are USDT interest rates so high? This is a good question considering that USDT’s price is pegged to the US dollar, reducing volatility risk to almost zero.
Nexo and others offer better interest rates thanks to their business model of lending cryptocurrencies to borrowers where users are willing to pay higher interest rates. The latter is ready to use its own cryptocurrencies as collateral, which is not possible with traditional banks. Therefore, the growing demand for loans backed by cryptocurrencies is pushing up interest rates.
USDT staking and lending
Staking and lending are two ways for investors to profit from their crypto holdings without selling them. Traditional savings accounts cannot generate significant yields in today’s low interest rate environment. Thankfully, investors can use stablecoins like USDT for staking and lending instead.
The main difference between staking and lending is that the former requires users to lease USDT to a blockchain or crypto platform in exchange for rewards, whereas USDT lending involves lending funds to borrowers to earn interest. It is necessary.
Subscribe to Bitcoin Market Journal to stay up to date on the latest in lending and staking.
