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How to choose the best crypto lending platforms for top returns?

Relite Education
Jul 26, 2021
5 min read

What exactly is Crypto Lending?

Before we jump into revealing our top 10 selection of platforms below, I was really happy to get to write on the topic. Just a week ago my friend Marcus, who has been accumulating and holding onto Bitcoin for a few years now, having the time of his life, finally sobered up into a money-making mood, and asked me:

“Where should I deposit and lend my bitcoin for 10% compounded?”

So, the definition of crypto lending: Investors lend cryptocurrencies to borrowers in exchange for interest on the amount.

Investors can facilitate crypto lending and crypto loans via cryptocurrency lending platforms and lend their bitcoin and other cryptos.

Categories of cryptocurrency loans

There are two broad categories of cryptocurrency loans. These are:

  1. Custodial crypto loans ­ These are centralized loans (CeFi) where the trader cannot access their collateralized assets as the lender controls the assets' private keys.
  2. Non-custodial crypto loans – These are decentralized loans (DeFi). In this model, borrowers and lenders depend on smart contracts. Additionally, the trader is always in control of the assets' private keys.

What do I need to take out a crypto loan?

Applying for a cryptocurrency loan is unlike the traditional finance process. Here, the loan-to-value ratio (LTV), the ratio between the loan amount and the collateral value. For instance, if you put $1000 worth of crypto and receive an $800 loan, your LTV ratio is 80%.

Risks involved in taking out a crypto loan

Unlike traditional finance, cryptocurrency assets are not covered by any federal body; thus, there is no federal insurance for losses made, and traders are exposed to the following risks:

  • Technical Risk – These include protocol breakdown, hacking, protocol failure, and any other technical-related issues leading to losses.
  • Counterparty Risk – As there are no regulations on the amount of liquidity a crypto lender is to keep, a sudden withdrawal or massive loan default may lead to the platform's collapse.
  • Margin calls and forced liquidation – To prevent liquidity during market downturns, a platform may require borrowers to increase their collateral or forfeit a portion of their deposit, which leads to losses.


How are crypto loans taxed?

Because the IRS considers Crypto-assets as property, the use of cryptocurrency as collateral to get a loan is not considered a sale; therefore, it is not taxed. However, crypto loan fees and interest charged on loans attract some form of tax.


What are the important parameters for the best crypto lending platforms?

In our analysis, these are the guidelines we employed:

  • Interest rates
  • Supported crypto
  • Flexibility
  • Restrictions
  • Community feedback

The Top 10 Highest Yielding Crypto Lending Platforms

Wondered how to lend your Bitcoins? Or what kind of yields are possible through lending cryptocurrency and crypto loans?

The following table summarizes what we believe are the optimal crypto lending platforms allowing users to receive the highest yields through their crypto loans.

Swipe left
Crypto lending Platform
Centralized or Decentralized?
Rating out of 5
Interest Rates
BTC
ETH
USDT
DAI
XRP
XLM
Aave
BlockFi
Cake
Basic
-
0.0%
0.1%
2.7%
-
-
Celsius
Crypto.com
Nexo
Max
-
0.0%
0.1%
2.7%
YouHodler
Binance
CoinLoan
Decentralized
3.2
Basic
0.5%
0.5%
9.3%
8.5%
3.5
-
-
-
Centralized
Max
5.0%
4.5%
9.3%
8.5%
-
-
-
Decentralized
3.0
Basic
5.0%
5%
8.0%
-
-
-
-
-
-
Max
7.5%
7.5%
8.0%
Decentralized
4.0
Basic
Max
Basic
Max
4.4%
5.3%
8.9%
8.9%
2.5%
3.1%
6.2%
6.3%
11.2%
11.2%
3.1%
3%
3.0
Centralized
1.5%
3.5%
6.0%
6.0%
-
0.5%
8.5%
8.5%
14.0%
14.0%
-
5.0%
Centralized
3.7
Basic
Max
Max
Max
Max
4.0%
4.0%
4.0%
4.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
12.0%
12.0%
Centralized
Centralized
Centralized
3.8
3.7
3.5
Up to 12.7% for all 25 supported crypto assets
Up to 7% for all 58 supported crypto assets
Up to 12.3% for all 18 supported crypto assets

*The above information is subject to change as the platforms deem fit.

*US citizens are restricted from participating in
YouHodler.

Our first table (above) highlights some of the supported cryptocurrencies and interest rates in 6 of the crypto lending platforms in our top 10 list. The base and maximum interest rates are also given to show the amount of interest one can expect to gain from lending in these platforms.

Celsius is our top pick for earning interest as a crypto lender. Arguably among the best crypto lending platforms, Celsius supports a wide range of crypto assets (about 41), from stablecoins to lesser-known cryptocurrencies such as ZRX. Its expansive crypto support makes it an ideal lending candidate for most participants in the crypto economy. Further, Celsius has some of the best interest rates, with some digital assets earning over 10% interest in ideal scenarios. Its impressive interest rates and expansive crypto coverage earn Celsius a 4/5 rating by our team.

Just below Celsius is YouHodler. The crypto lending platform provides up to 12.7% APY on crypto-assets lent to its platform. Its crypto coverage is not as expansive as that of Celsius, thus its lower rating. Nevertheless, some crypto lenders will find the platform ideal for their unique situations. Potential users of the lender should know that the platform is restricted to US citizens.

CoinLoan, with an impressive APY of 12.3%, gets a lower rating due to its limited crypto-asset coverage. With only 18 coins, participants can feel somewhat limited, compared to the other crypto lending platforms.

A unique platform that deserves a place in our top 10 is Oasis. The platform acts as the hub for crypto loans from the Maker ecosystem. Its setup features two loan repayment methods. The first is where borrowers repay the loans on their own, while in the second, borrowers use their collateral to generate DAI, which is used to repay their loans.  Essentially, borrowers can borrow from themselves in the Oasis setup, thus earning a spot on our top 10 crypto lending platforms list.

An important observation from our list is that stable coins such as USDT and DAI have a generally higher APY than cryptocurrencies.

The PROs and CONs of Centralized vs. Decentralized crypto lending platforms

The long-standing argument between centralized and decentralized cryptocurrency lending platforms boils down to the following 3 points:

  • Cross-chain services
  • Security of funds
  • The flexibility of fiat conversion

Traditional and centralized lending institutions such as banks have stood the test of time but now show signs of old age as decentralized platforms show their worth. Centralized lending is currently only ahead because of the more convenient cross-chain or cross-platform solution. It is the preferred choice because it aids in the ease of fiat conversion. However, decentralized platforms are improving daily, shortening the distance to centralized platforms, showing that DeFi can disrupt the status quo.

The future of crypto lending platforms is cross-chain lending

As it stands, cross-chain services in DeFi are limited, which adds obstacles to hassle-free fiat conversions; nevertheless, DeFi users enjoy more security in lending and more control over their funds.

Source | Unsplash

While many good crypto lending options exist in the industry, the future of crypto lending platforms rests on cross-chain solutions that are pivotal to user convenience. Platforms focusing on getting the basic lending right, while also perfecting their cross-chain solutions, will ultimately be the leaders in crypto lending. Through Relite Finance’s platform users will enjoy crypto lending via cross-chain functionalities.  

The current paradigm of crypto lending platforms can ultimately be viewed as the first generation of crypto and bitcoin lending. To improve on this and for investors to receive greater yields on their crypto lent, the second generation of crypto lending platforms will be cross-chain solutions purported by Relite Finance. Relite’s ability to maximize cross-chain convenience will expand upon the progress made by existing centralized and decentralized crypto lending platforms while incentivizing even superior yield returns for investors.

This is where Relite’s cross-chain lending solutions will be significant. To ensure our platform will be the benchmark for all crypto cross-chain lending providers in the future, we’ve made sure that our progress remains unwavering in ushering a new dawn of crypto loans and lending for the yield-seeking investor.

In a recent company update, we’ve released our 2021-22 roadmap, which includes launching our staking and rewards incentives later this year, as well as our NFT collateralized loans and pools further down the line.

Frequently Asked Questions (FAQs) 

What is cryptocurrency lending? Here, investors lend cryptocurrencies to borrowers in exchange for interest in the form of cryptocurrency yield.

What is the best cryptocurrency lending platform? A platform giving you the best returns for cryptocurrency invested, or the lowest borrowing rates, available in most geographical areas, and provides the widest selection of cryptocurrencies. In our analysis, Celsius emerged as the victor.

Is crypto lending safe? Yes, it is; however, you must conduct due diligence and find out the particulars of the platform you intend to conduct your trade.

How do I get a cryptocurrency loan? Identify a suitable platform, get a suitable wallet, confirm your LTV, deposit the amount of collateral the platform requires, and get your loan.

Where can I lend my crypto? In any of the platforms we mentioned in our analysis, or any other cryptocurrency lending platform you are comfortable with.


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