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A credit-focused product manager at crypto trading platform FalconX breaks down why lending stablecoins is raking in yields of up to 10% right now — and details how to get started in crypto lending

  • Investors are earning hefty yields by lending cryptocurrencies.
  • FalconX’s David Martin shared with Insider how to get started lending cryptocurrency.
  • Martin also broke down why stablecoins are yielding so much right now.
  • See more stories on Insider’s business page.

The surge in interest in cryptocurrency this year has made some investors extremely wealthy.

Before the broader crypto sell-off in recent weeks, bitcoin had risen as much as 115%. Dogecoin had risen more than 12,000%. Ethereum had risen more than 470%. Other coins have also seen big gains as investors have snatched them up.

But for those investing in cryptocurrencies for the long-term, there’s a simple way to add to these gains: loaning the currencies out.

In the crypto-driven world of decentralized finance (DeFi), individuals can play the role that banks often do in traditional finance. They can lend their money for a fixed period of time to other individuals, in return for interest payments. 

“The easiest way to think about it is in traditional finance, if you have a money market account at Bank of America, you’re getting like .1% interest, if you’re lucky,” said David Martin, a product manager at crypto trading platform FalconX, in an interview with Insider. “In crypto you’re getting upwards of 10% for dollars, for a stablecoin.” For comparison, the benchmark 10-year Treasury note yielded 1.61% on Friday.

Martin continued: “There are a lot of people that want to hold bitcoin forever — HODLers. And if you’re going to hold bitcoin for 10 years, you might as well earn an extra 5-10% on top of it every year.” 

So, why such a gap in yield between DeFi and traditional finance? Martin attributed it to two reasons. First, in traditional finance, the bank keeps most of the interest generated. This is due in part to things like greater overhead costs. With blockchain technology, transactions are done on a network using computer code, meaning less overhead costs. 

Second, he said, there is currently heightened demand for dollars in the space, with many institutional investors still not buying in. This means some of the highest yields are for coins tied to the US dollar, like US Dollar Coin (USDC).

“A lot of companies, traditional financial institutions, still won’t work with cryptocurrency companies,” Martin said. “And so there’s definitely a premium for dollars, which is why if you have a stablecoin, you can get 8%, 10%, 12% yield.”

How to lend your cryptocurrency

Lending is done on any number of platforms. It can be done on Coinbase, for example, but higher yields are often found on other platforms, like Celsius. 

The above two names are examples of centralized platforms. There are also decentralized platforms, like Compound, where users have their own digital wallet and keys. 

Each platform has its own lending rates for different currencies. Below is a May 27 screengrab from the website DeFi Rate showing current rates for several currencies on various platforms. 

Screen Shot 2021 05 27 at 3.49.56 PM



DeFi Rate


So, users can loan USDC, for instance, for a 10% annual rate using Celsius, but only 0.15% using Coinbase. Interest is paid in the currency it’s lent in. 

Interest rates do fluctuate, however, and each platform has its own practices for how often they can change and how often they make interest payments, Martin said. Still, users can check longer-term averages of rates to get a better feel of the rate’s behavior.

DeFi Rate also has a comparison calculator to see how much returns on different coins would be on different platforms at different durations.

For example, below are the returns on various platforms for loaning 1,000 USDC for one year (Celsius and Nexo offer the best returns at 105.16 USDC).

Screen Shot 2021 05 27 at 4.32.50 PM



DeFi Rate


And below are the returns for lending 1ETH for one year.

Screen Shot 2021 05 27 at 5.01.28 PM



DeFi Rate


Lending risks

One issue with decentralized finance, Martin said, is that there is by definition no entity responsible for what happens on the platforms.

“If Compound blows up tomorrow, who is to blame? You can’t sue anybody. How do you recoup your money? If Coinbase got hacked and all of their assets are gone, the world of Coinbase users would be suing Coinbase. You can’t sue Compound, because it’s not an entity. It’s a decentralized eco-system.”

Data breaches have occurred in the crypto space before. It happened to centralized platform BlockFi a year ago, for example. 

People also may distrust the platforms simply because the crypto and DeFi spaces are so new, Martin said.

To counter this uncertainty, some platforms have insurance for investors’ assets. Investors can also purchase their own insurance through firms like Nexus Mutual and Cover Protocol, Martin said.

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