In today’s financial landscape, credit allows customers to purchase without immediate capital.
Conversely, customers with accumulated capital who wish to earn from it have various options.
One such option is a certificate of deposit (CD).
Earning Passive Income with Certificates of Deposit (CDs)
A CD is typically issued by banks and financial institutions when a client makes a significant deposit.
The institution holds the deposit while the customer receives a fixed or percentage-based interest rate as compensation.
The terms and conditions of CDs can vary depending on the issuing institution and the deposited amount.
In the realm of cryptocurrency, the concept of certificates of deposit is still relatively unexplored.
While the idea is intriguing, few crypto projects have ventured into the world of CDs.
Riding Price Fluctuations for Returns
However, it is essential to note a significant difference in cryptocurrency-based CDs.
Traditional finance CDs are based on deposits in fiat currencies, which typically experience minimal price fluctuations.
In contrast, cryptocurrencies can undergo significant price spikes and corrections.
As a result, the return rate on a crypto-backed CD fluctuates in correlation with the price movement of the associated token.
While price changes can work in favor of investors if the price of their CD tokens increases, it is crucial to acknowledge that crypto-based certificates of deposit carry a higher risk level than their traditional finance counterparts.