Gemini Earn Review: Earn Crypto Interest

Introduction and Key Takeaways

Gemini Earn is a crypto interest account offered by Gemini, a leading US-based cryptocurrency exchange. With Gemini Earn, you can earn up to 7.4% annual interest on your cryptocurrency holdings, paid daily.

Key features and benefits of Gemini Earn include:

• Earn up to 7.4% APY on 39 different cryptocurrencies
• No minimum balance required and no fees to transfer into Earn
• Interest is paid daily and can be auto-transferred to your Gemini trading account
• Gemini is a licensed and regulated exchange with robust security measures
• FDIC insurance on USD deposits and digital asset insurance on crypto holdings

Key risks and drawbacks to consider:

• Interest rates are variable and subject to change
• Not all cryptocurrencies are eligible for earning interest
• Your crypto is lent out to institutional borrowers, introducing counterparty risk
• Gemini Earn funds are not FDIC-insured like traditional bank accounts
• Crypto assets are not legal tender and carry significant volatility and regulatory risk

Gemini Earn can be a good option for crypto investors looking to passively grow their holdings with relatively low risk. However, it’s important to understand the risks involved and not treat it like a traditional savings account.

What is Gemini Earn?

Gemini Earn is a crypto interest account that allows you to earn interest on your idle cryptocurrency holdings. It’s offered by Gemini, a New York-based crypto exchange and custodian founded by Cameron and Tyler Winklevoss in 2014.

With Gemini Earn, you can deposit supported cryptocurrencies like Bitcoin, Ethereum, and stablecoins and earn up to 7.4% annual interest on your balance. Interest is compounded and paid daily, and you can redeem your crypto at any time with no fees or penalties.

Gemini Earn works by lending out your deposited crypto to institutional borrowers like hedge funds and financial institutions. These borrowers pay interest on the loans, which Gemini passes back to you as the account holder. Gemini carefully vets borrowers and requires them to post collateral to secure the loans.

According to Gemini, all Earn customer crypto assets are held 1:1 and available for withdrawal at any time. Gemini also has $200 million in cold storage insurance to protect against theft or loss of digital assets.

How Gemini Earn Works

Getting started with Gemini Earn is a simple process:

1. Create a Gemini account and complete identity verification
2. Transfer crypto into your Gemini account or purchase crypto directly on the platform
3. Navigate to the Earn section and select which crypto you want to lend out
4. Agree to the Earn terms and confirm your deposit
5. Start earning daily compounding interest on your crypto

Gemini Earn offers two different interest rates based on the cryptocurrency:

• Stablecoins like GUSD, DAI, and USDC earn 7.4% APY
• Other cryptocurrencies like BTC, ETH, and LTC earn 3.05% APY

Interest is calculated daily based on your end-of-day balance and paid out daily as crypto to your Earn account. You can choose to have your interest automatically transferred to your Gemini trading account daily, or keep it in your Earn account to compound over time.

There are no minimum balances required to earn interest, and you can redeem your crypto from Earn at any time with no fees or penalties. Gemini does charge a small convenience fee if you want your earned interest sent to an external wallet address.

Overall, Gemini Earn offers a simple way for crypto holders to put their assets to work and earn passive income. The daily compounding and payout is a nice feature compared to other platforms that pay monthly.

Supported Cryptocurrencies on Gemini Earn

As of May 2023, Gemini Earn supports 39 different cryptocurrencies for earning interest:

• Bitcoin (BTC)
• Ethereum (ETH)
• Chainlink (LINK)
• Dai (DAI)
• Uniswap (UNI)
• USD Coin (USDC)
• Gemini Dollar (GUSD)
• Polygon (MATIC)
• Fantom (FTM)
• Avalanche (AVAX)
• Cardano (ADA)
• Solana (SOL)
• Dogecoin (DOGE)
• Litecoin (LTC)
• Shiba Inu (SHIB)
• Amp (AMP)
• Cosmos (ATOM)
• Decentraland (MANA)
• Enjin Coin (ENJ)
• Filecoin (FIL)
• The Graph (GRT)
• Injective (INJ)
• Loopring (LRC)
• Maker (MKR)
• Orchid (OXT)
• PAX Gold (PAXG)
• Ren (REN)
• Storj (STORJ)
• SushiSwap (SUSHI)
• Synthetix (SNX)
• yearn.finance (YFI)
• 1inch (1INCH)
• API3 (API3)
• Balancer (BAL)
• Bancor (BNT)
• Compound (COMP)
• Curve (CRV)
• Uma (UMA)

This covers many of the top cryptocurrencies by market cap, as well as major stablecoins and DeFi governance tokens. However, some notable coins like XRP, Stellar Lumens, and Monero are not currently supported for earning interest.

The interest rates offered vary by cryptocurrency, with stablecoins generally offering the highest rates at 7.4% APY. The rates for volatile assets like BTC and ETH are lower to account for the higher risk profile.

It’s important to note that the interest rates are variable and subject to change based on market conditions and borrowing demand. Gemini may adjust the rates at any time, so the APY you earn can go up or down over time.

Benefits of Gemini Earn

Gemini Earn offers several key benefits for crypto investors looking to earn passive income on their holdings:

1. High Interest Rates

The up to 7.4% APY offered on stablecoins is very competitive compared to traditional savings accounts and even many other crypto interest platforms. For example, the national average APY for a savings account is just 0.23% according to Bankrate.

Even the 3.05% APY on volatile assets like BTC and ETH is attractive considering you’re earning it on an asset with price appreciation potential. Just be aware that you’re also taking on the risk of price volatility – your earned interest could be offset by a decline in the underlying asset price.

2. Daily Compounding and Payout

Gemini Earn compounds and pays out interest daily, which can help your earnings add up faster over time compared to monthly payouts. You’re essentially earning interest on your interest.

Here’s an example from Gemini of how this daily compounding can add up: If you deposited 1 BTC on Gemini Earn at a 3.05% APY, you would earn about 0.0092 BTC in interest over one year with monthly compounding. With daily compounding, you would earn about 0.0094 BTC – a small but meaningful difference, especially on larger balances.

3. Flexibility and Liquidity

With Gemini Earn, you can redeem your crypto at any time with no fees, penalties, or lockup periods. This gives you the flexibility to access your funds if you need them or want to sell and capture gains.

In contrast, some other crypto interest platforms like BlockFi and Celsius (prior to its collapse) have required one-month lockup periods to earn the highest interest rates.

The ability to quickly move your crypto in and out of Earn is a nice feature, especially in volatile market conditions where you may want to trade more actively.

4. Robust Security Measures

Gemini is known for its strong focus on security and regulatory compliance. As a New York Trust company, Gemini is licensed and regulated by the New York State Department of Financial Services (NYDFS). This means they’re subject to capital reserve requirements, cybersecurity audits, and other strict oversight.

In terms of technical security, Gemini uses features like two-factor authentication (2FA), hardware security keys, and whitelisted withdrawal addresses by default. The majority of customer crypto is held in cold storage, with digital asset insurance to protect against theft or loss.

Gemini also has a SOC 2 Type 1 security compliance certification – a widely recognized auditing standard verifying that a company adheres to security and confidentiality best practices. They were the world’s first crypto exchange and custodian to complete both a SOC 1 Type 2 and SOC 2 Type 2 exam.

5. Simple and Intuitive Platform

Gemini has a user-friendly web and mobile app that makes it easy to buy, sell, and earn interest on your crypto. The Earn interface is simple and intuitive – just a few clicks to transfer funds in and start earning.

Gemini also offers a unique Crypto Rewards Credit Card that lets you earn up to 3% back in Bitcoin or other crypto on every purchase. These rewards can be automatically deposited into your Earn account to compound over time.

The ability to seamlessly move funds between Gemini’s trading, Earn, and custody (Gemini Wallet) platforms is a nice benefit compared to using separate providers for each function. This can help simplify your crypto management.

Risks and Drawbacks of Gemini Earn

While Gemini Earn offers attractive rates and a user-friendly platform, there are some important risks and limitations to be aware of:

1. Counterparty Risk

When you deposit crypto into Gemini Earn, you are lending it out to institutional borrowers. While Gemini carefully vets these borrowers and requires collateral, there is still a risk that a borrower could default and be unable to return your funds.

This counterparty risk is similar to what you face with a traditional bank savings account. Your deposit is essentially a loan to the bank, which they use to make loans to other customers. If too many of those loans default, the bank could become insolvent.

The key difference is that traditional bank accounts have FDIC insurance, which protects your deposits up to $250,000 per account type. Gemini Earn funds do not have FDIC insurance. While Gemini does have private insurance for its hot wallets, this doesn’t guarantee full recovery of customer funds in the event of a large-scale default or hack.

2. Variable Interest Rates

The attractive interest rates offered by Gemini Earn are not locked in – they are variable and can change at any time based on market conditions and borrowing demand. In fact, Gemini has lowered rates several times over the past year as crypto lending markets have become more competitive.

While the rates are still significantly higher than traditional savings accounts, it’s important to understand that your future earnings are not guaranteed. Your effective interest rate could drop significantly from when you first deposited. Contrast this with a traditional bank CD where you lock in a fixed rate for a set term.

3. Not All Cryptocurrencies Supported

While Gemini Earn supports a decent range of cryptocurrencies, there are still many assets that are not available for earning interest. If you want to earn yield on smaller altcoins or more obscure stablecoins, you may need to look at other platforms.

Even among supported assets, the interest rates can vary significantly. Stablecoins generally offer the highest rates (7.4% APY), followed by ETH and BTC at 3.05%, with other altcoins somewhere in between. If you’re seeking the absolute highest rate on a particular asset, it’s worth shopping around.

4. Opportunity Cost

When you commit funds to Gemini Earn, you are giving up the opportunity to deploy that capital elsewhere. For example, you might be able to earn a higher return by:

• Staking your crypto directly and earning protocol rewards
• Providing liquidity to a DeFi platform and earning trading fees + token rewards
• Actively trading and capturing market swings

Of course, these activities also come with their own risks and require more active management. But it’s worth considering the opportunity cost of simply parking your crypto in Gemini Earn, especially in bull market conditions where there may be more profitable opportunities available.

5. Regulatory Uncertainty

The regulatory landscape around crypto lending and interest-bearing accounts is still evolving. In some jurisdictions, regulators have taken the position that these products may be unregistered securities offerings.

For example, in 2021 several U.S. states issued “cease and desist” orders against crypto lender BlockFi, arguing that its interest accounts were unregistered securities. BlockFi ultimately agreed to pay $100 million in penalties and pursue registration of its products.

Gemini has not faced any similar regulatory actions to date. As a licensed trust company, Gemini Earn is structured differently than BlockFi’s products. But there is still a risk that evolving regulations could impact the availability or terms of Earn in the future.

Investors should be aware of the regulatory uncertainty and risks around crypto lending products like Gemini Earn. Make sure you understand the terms and are comfortable with the level of risk before depositing significant funds.

Gemini Earn vs. Other Crypto Interest Accounts

Gemini Earn is just one of many crypto interest account products available on the market today. Some of its main competitors include:

• BlockFi Interest Account
• Celsius Network (currently in Chapter 11 bankruptcy)
• Crypto.com Earn
• Nexo
• Coinbase (not a direct interest account, but offers staking rewards)

Here’s a quick comparison of how Gemini Earn stacks up:

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