You might be one of those people who is thinking about investing in cryptocurrency for the future. You have seen the potential for growth in Bitcoin and other digital assets and you want to put some away. We are often asked if there is a Bitcoin savings account. Because Bitcoin is a decentralized digital currency the answer to this question is no, but you can still save Bitcoin and even get a return on your investment.
Bitcoin Wallets and Savings Account Differences
It is hard to compare Bitcoin wallets with savings accounts because the two are completely different financial instruments. Both of them are used to store and hold currency. One pays interest and one does not. One has a physical existence that you can see at the bank, and one is a virtual currency. Finally, a third party bank manages one while the other is managed somewhat autonomously through a digital ledger.
A Bitcoin wallet is required for anyone that wants to own Bitcoin. This wallet is a combination of public and private keys which are used to send and receive Bitcoin. There are many types of wallets that you can get. Some are kept online and others are kept on your person.
A savings account is an account at a bank or credit union where you can make deposits of cash. The bank holds your cash for you and keeps it safe. The bank can also use your cash in various ways. You will not lose the cash when this happens. You will, in fact, be paid a token sum for letting the bank store your money. This is called interest.
There is no interest with a Bitcoin wallet, but there is the the possibility of a return. Bitcoin is an asset that can go up or down in value. This means that your Bitcoin is worth a certain amount of cash. That amount can change from one day to the next because of the volatility of the cryptocurrency markets.
Which Offers a Better Return on My Money? A Savings Account or Bitcoin?
Some people that invest in Bitcoin have similar reasons for doing so as those who open a savings account. They both want to store away something of value and have it grow over time. So, which one of these will give the saver or investor the best return?
The interest rates on savings accounts are generally set in stone and can vary from bank to bank. In recent years in the US the interest rates on savings accounts have been very low. On average those who on a savings account receive an APY or 0.09%. Some banks may offer 2.35% APY or higher. Banking customer usually shop around to find the best deal on a savings account.
With Bitcoin there is no interest but there is a possibility of a return due to the fluctuations of Bitcoin’s price. Those who invest in Bitcoin with the hopes of a return try to buy low and sell high. They watch the markets and try to speculate when the price of cryptocurrency will go up.
Let’s say you invested $100 in Bitcoin. A year later that same Bitcoin investment could be worth $150. That would be a 50% return on your money, not a bad investment and far better than the rate that you would get parking that same $100 in a savings account.
There is one very important difference here. The interest on your savings account is guaranteed. It will be paid to you as long as you hold money in the savings account. With Bitcoin there is no guarantee that you will get a return on your money. You could even lose money if the market price of Bitcoin goes down.
Are Bitcoin Wallets Insured Like Savings Accounts?
When you open a savings account you will also note that the account is insured by the FDIC up to a certain amount. The bank guarantees you that your money will be kept safe. In the event someone robs the bank you will still have your money thanks to deposit insurance.
With Bitcoin there is no such deposit insurance. You are solely responsible for managing your Bitcoin wallet and keeping it secure. If someone is able to access your public and private keys then they can have access to your Bitcoin. Your wallet could be emptied and there will be nothing you can do about it.
Be Your Own Bank With Bitcoin
One of the hallmarks of cryptocurrency is that it does not depend upon oversight or management by a third party such as a bank. With Bitcoin you are in complete control of your assets and how they are distributed. In a sense cryptocurrency allows you to be your own bank. This comes with some risk, but the rewards can be generous.
Instead of being at the mercy of a savings account which pays you a pittance in interest, you can craft your own rate of return by making smart trades in the cryptocurrency markets. There are even platforms today that will help you loan others Bitcoin and receive interest on the loan.
It is much easier to transfer Bitcoin than it is to transfer cash from a savings account. There are also lower fees in many cases. Finally, Bitcoin can offer more security when it comes to your assets than most banks.