Cryptocurrency is one of the most volatile assets on the planet, and that means it can be both profitable and risky to invest in, depending on what side of the trade you’re on. This article will discuss a few key rules that investors should follow to help them make wise decisions about lending cryptocurrency.
Let’s take a look at these rules.
- Keep an eye on the ever-changing regional crypto rules
Cryptocurrency is still new to most governments, so the rules are constantly changing. It’s important for cryptocurrency holders interested in lending their coins to know how these changes might impact them. For example, in some cases, you may be required to declare your cryptocurrency holdings when crossing borders, which could require additional documentation.
On the other hand, some governments have taken a more relaxed approach to cryptocurrency lending – for example, Thailand has recently announced plans to legalize it to spur further crypto development and usage. Besides that, if you’re a beginner and willing to start crypto trading, it would be best for you to go with Bitcoin Circuit.
- Use only well-known lending sites
Several lending sites are available online, but not all of them are safe. Make sure you use only well-known and reputable sites to avoid becoming the victim of a scam. Be especially careful when borrowing or lending cryptocurrencies through an unsecured platform such as social media or email. These platforms can be easily hacked, leading to the theft of your funds.
- Borrow, lend, and be reimbursed in altcoins or fiat cash
Volatile altcoins include Ethereum (CRYPTO: ETH) & Cardano because they’re entirely bound up with the borrowers; if they fall while you’re leasing them out, you won’t be able to sell them and reduce your damages. On either side, a cryptocurrency you are presently lending might experience substantial increases, which is wonderful for borrowers but bad for you.
If you persist in lending out cryptocurrencies, you shouldn’t have to miss out on profits if the currency you’re giving out has a rapid increase in value. Seek for reliable platforms that allow automatic pricing modifications; if the worth of the cryptocurrency you’re lending increases when you’re lending it, the sum the borrower needs to pay back rises to match it.
- Avoid DeFi platforms if you’re a skilled crypto trader
DeFi platforms can be a great way to earn interest in your crypto, but they’re not recommended for skilled traders. These platforms are designed for less experienced investors, so the spreads between buying and sell prices are often much wider than on traditional exchanges. For more experienced traders, it’s usually easier and more profitable to trade directly on exchanges.
The Bottom Line
Crypto investment is a highly profitable venture, and if you’re lending crypto, you must be careful with it. To protect yourself when borrowing or lending cryptocurrencies, it is important to use a reputable platform that follows best practices. Always keep your private key and recovery phrase safe and secure.
Make sure you understand the terms of the loan before signing up. If something seems too good to be true, it probably is! Follow these key rules for safer crypto lending.