Did you know that you can earn interest from your Bitcoins! It's time to put them to work. Instead of just holding and hoping for the best, you can lend them out and earn interest. Here's how it works.
Earning interest with BitBond
BitBond is a p2p lending platform for Bitcoin. BitBond is designed to connect lenders with ecommerce businesses. Lenders lend money to these small businesses to help them with turnover and buying stock. And in return the lender earns interest.
What I like about this platform is that its targeted towards ecommerce instead of just any business. P2P lending platforms have failed in the past because they lend money out to all types of businesses instead of just ones with a proven business model.
BitBond credit checks each borrower and makes sure they are legitimate. Of course it's also important that you do due diligence too and only invest in loans that make sense to you.
This makes BitBond a much more attractive offering for lenders.
How much Interest can you earn on Bitbond
Bitbond's marketing material lists a potential return of 13% – Obviously much higher than what you'd get putting your money into a savings account. But this amount will vary from user to user and it all depends on how many loans you invest in and how diverse your portfolio is.
Top Tips for Bitbond
Here are my top tips for earning interest with BitBond:
- Diversify: Invest small amounts across a lot of loans. This way you have a better chance of reducing potential defaults.
- Don't fund more than 20% of any loan. Bitbond combines lenders to fund loans. This way you can diversify. But you don't want to be too heavily invested in any one loan. So make sure you set 20% as an absolute upper limit. I would aim to fill even less than that.
- Choose shorter term loans – Aim to invest in loans with a shorter duration. The longer the loan, the more chance that something will go wrong. A shorter loan might be for something like a quick stock purchase, where the borrower can repay quickly after the goods have sold.
- Don't invest all your Bitcoin – just like all investments, only put <5% of your equity towards any one investment.
Other ways to earn Interest with Bitcoin
Bitbond isn't the only option for earning interest on your bitcoins. It's also possible to lend bitcoins to traders. Traders, on platforms such as Bitfinex can trade using Leverage. Leverage allows a trader to control a larger position with a smaller amount of capital. This capital comes from lenders. While lending on platforms such as Bitfinex, Liqui.io or Poloniex is less risky than Bitbond – it still does carry some risk. It's less risky because the trading platforms are designed so that traders need to have a margin to support each trade. If they don't the positions get automatically liquidated so lenders don't lose out.
Scams to be aware of
Stay away from anything that offers to pay a fixed amount of interest each day. These are often called HYIP (High Yield investment programs). These are straight up pyramid scams. Early investors are paid using the funds from new members. And when enough money has been pumped into the program, the person behind it shuts up shop and everyone loses out.