Cryptocurrency became a popular investment model in 2009. Bitcoin became an instant hit amongst investors given its utility and ease of operation. Considering the success rate and the investment model, many cryptos made their entry. Today, more than 19k+ cryptos are being traded daily. Most of these cryptos work on blockchain technology. These cryptos also enable various services including gaming, automation, and digital transactions. Blockchain gained massive interest in the financial market. It has also been able to attract major investments in its working philosophy. Various research and development investments are being made in this technology. All these crypto tokens work on the decentralized finance model. It eliminates the need for investment agencies and regulatory authorities. Every user transaction is validated by a group of admins in the network. These admin users work as data validators undertaking mining on crypto tokens. Major cryptocurrency exchanges like british bitcoin profit offer multiple options to buy bitcoins.
Understanding the working model of crypto banking
Any regulated institution that holds a valid license to off er financial services. Such type of institution can also hold US dollars and offer various financial services.
In 2019, the concept of crypto banking took instant attention. A crypto bank is nothing but a financial agency. This agency can hold and trade traditional as well as cryptocurrencies. Three institutions were identified to undertake crypto banking activity. It includes Kraken, Avanti, and Custodia. These crypto banks do not operate like regular banks. Unlike traditional banks, crypto banks cannot offer lending services to their clients.
These crypto companies can become a type of bank. In most cases, cryptos work on major investments and do not lend money. Additionally, these banks cannot also provide insurance on investments.
Crypto banking is an allied service that allows a financial institution to hold your funds. These banks are engaged to manage digital currency through a financial service provider. The banking services include various options. The services include the distribution of debit cards, holding your fund, enabling payments, etc.
How to get started with crypto banking?
To take the first step in crypto banking, you need to buy crypto tokens. As an investor, you can easily buy crypto tokens from any popular exchange. These exchanges also allow you to store your digital tokens in their wallet.
Other than crypto exchanges, you can also buy crypto tokens using Fintech firms. PayPal is a classic example of this service. The website now allows users to buy crypto tokens using their payment gateway. It also provides users with the option to buy tokens using traditional currency or alternate cryptos.
Growth of crypto interest accounts
Ever heard of the popular term called crypto interest accounts? This is an emerging trend in the investment market today. Popular crypto exchanges like Gemini offers this type of account for crypto holders. As the name suggests, these accounts are typically used to hold crypto interests. So how do you earn this interest? Simple, you just need to lend your existing tokens. The firms will borrow crypto tokens from your account for other investments. As a crypto lender, you continue to earn interest on the same. However, the prices and interest on cryptos are dependent on the market price of these tokens.
Is crypto banking a safe concept?
Now, consider any investments in cryptos with your fingers crossed. Every crypto token is subject to price fluctuations. The prices keep changing on an ongoing basis and markets are never the same. You tend to gain and lose in huge volume through crypto tokens.
None of these crypto banks are secured or regulated. There is no guarantee that you will earn back any of your lost funds. While traditional banks offer various insurance, the same does not work for cryptos.
How is the market crash impacting crypto banking?
It is always true that there is no guarantee to your crypto investments. The prices are always fluctuating. Hence, in case of a market crash, the investments are lost and the path to recovery is long. The ongoing crypto market crash is a perfect example of this. Many new investors are on the verge of losing all their investments. The current situation is not favorable for the crypto banking sector as well. Investors are trying to withdraw their funds with no hope of recovery.