KuCoin: The Best Place to Earn Passive Income? (PART 1)

The cryptocurrency market is changing, and we all need to keep evolving with it if we want to be successful.

If you have been following me for any length of time, you will most likely already know that one of my greatest passions is building a passive income through cryptocurrency. The thought of being able to make money day or night, even while I’m sleeping, without doing a thing is very appealing to me. My goal is to eventually build this passive income up to a level that will allow me to have financial freedom. In fact, I write an ongoing monthly series marking my progress towards my own goals.

But as I mentioned above, the crypto market is changing and what once came easy, no longer is the case and I have had to evolve with it.  

In the past, I made a majority of my passive crypto income by lending out my bitcoin to various third party companies and also staking coins such as Ethereum and Polkadot.  Lending worked out very well for a period of time while these services offered great rates.  But, during the last year, most of these services have heavily decreased their rates, or lowered the tiers to receive those maximum rates. Making it much harder to earn the same amounts that I was before.  Even though it is harder, it is still possible; it just requires much more time, effort and research now. Making the whole process not very passive anymore.

When it comes to lending and staking I have used almost all of the services out there.  None of them have been perfect, some were better than others, and some were places that should be completely avoided in my opinion. Whether it’s the rates they offer, the fees they charge, their ease of use, confidence of the service, or the features they offer. Each of them had flaws and none completely fit the needs of what I was looking for.

The constant market changes have led me to always being on the lookout for new and better options. Which is why I began to look into KuCoin; a place that I’ve often heard good things about from my readers. I’ve had an account with KuCoin for quite awhile, but had used it sparingly in the past.  This all began to change once Publish0x began auto-depositing rewards into your KuCoin account after ETH gas prices skyrocketed.  And so I began using the exchange much more and liked the experience that I was having there.  As an American, this was one of the best places to get new altcoins that weren’t available anywhere else. But admittedly, I had still not made use of any of their passive income offerings or at the very least, looked into them yet.

Upon first visiting the KuCoin website, and navigating to their Earn section of the website, I was pleasantly surprised at just how many services that they offer.  While many of the places that I’ve used in the past had offered some combination of these services. Few offered all of them.  I was hopeful that this exchange had the chance to be my one-stop-shop for everything crypto. Buying, lending, staking and trading.

But me being the type of person that I am, and wanting to research everything very carefully before making any decisions, I wanted look into their offerings much closer.

An important not is that this article ballooned up largely in size as I went heavily in depth over the ways to earn passive income on KuCoin and for your convenience, instead of having the full article take an hour for you to read. I decided to split the article up in half, and post the 2nd part later this week.

So without further delay let’s go through it together!

KuCoin Lending

 The method that I use to make most of my passive crypto income is by lending crypto, therefore KuCoin’s lending offering is very important to me.  When deciding whether to lend my coins to a service there are three different categories that matter the most to me. Security, interest rates, and ease of use.

Lending here is different than on the previous services that I have used. It is more of a peer-to-peer lending style, lending directly to the borrower instead of just depositing funds onto the lending service and it doing all of the work behind the scenes.  Borrowers post hopeful bids of the amount of coins that they are hoping to borrow, the interest rate they’re willing to pay, and also set the time-duration of the loan.  On KuCoin the users that borrow are often using the funds for their margin trading.  Longing or shorting.

It is very nice to know and be able to choose where your money will be going to, rather than it being a mystery.

KuCoin has posted their own very helpful FAQ page detailing crypto lending and the things that you need know before you do right here.

KuCoin Lending Information FAQ

For anyone who is interesting in using KuCoin's Crypto lend feature. You can find it here.

KuCoin Crypto Lending

Security & Openness 

As always, the most important thing that you need to consider when deciding whether to use a service or not is the level of security they have.  What good is making incredible amounts of money, if you could lose it all in an instant.  Just like with any 3rd party or exchange lending service, you need to always be aware of the famous phrase; “not your keys, not your coins.” But for those of us who are passionate about building a crypto passive income, this is a risk that many of us are willing to take on.

The key thing that I am looking for here is that lenders are always being paid for the coins that they’re lending out, that their original funds are being returned to them in full. And that if there is a problem, that KuCoin is taking action and reimbursing those affected.  

I was happy to learn that KuCoin passed the test here. I searched the internet wide and long, looking for reviews or complaints from people who potentially lost their money while lending on the service.  I couldn’t find a single person that didn’t have their money returned to them. Now moving on to talk about what would happen if there was a problem that would come up. If for some reason the borrower would be liquidated and the value of their coins fell below the loan amount. KuCoin has an insurance fund just for that type of situation.  Out of each lending transaction, they take 10% of the interest earned and deposit that into their insurance fund.  Which is used to pay for any type of miss-happening that may take place. They also take an additional 5% transaction cost which goes to KuCoin.  

I must admit that I really was happy to see them being to upfront and open about what the fees are, but also where they are going and how they will be used.  After using other services in the past who were not open about how they were making the profits to pay interest rates, it created some doubt that some of the companies might not be able to remain solvent or profitable in the future.  Especially after learning that many of these services use DeFi or perform arbitrage in order to pay the interest rates.

Interest Rates

While I would be thrilled if the most important thing to consider for people was the security of the platform, but the reality is that a large percentage of people care only about what the interest rates are and how much money they can make.  Especially when so many people have been forced to switch services due to the lowering interest rates during the past year. So how does KuCoin fare with rates? 

Because lending on KuCoin is more of a peer-to-peer type, that also means that there isn’t a set interest rate that you will receive for lending out your coins.  For that reason there is a wide variety of interest rates that you could choose from.  For example, let’s look at two coins that I often lend out.  With bitcoin, currently there are rates ranging starting from 3.65% APR, ranging all the way up to an incredible 73% APR.  Looking at USDT, the rates are even better. Starting from 8.03% APR and ranging up to 730% APR.  As you can see, you have the opportunity to earn much more than you would if you were using some of the other big name lending services.  These rates will vary greatly over time.

But, why does the APR reach such high levels for lending?

It is heavily affected by what is currently happening in the crypto market.  For example, when the market is pumping or dumping, more people will be willing to maximize their potential profits by margin trading.  This is what will cause an increase to the demand for crypto borrowing.  When the demand increases, that also causes the lending rates to increase as well.  This is why rates can reach such high levels at times of high interest, and may also decrease during quiet times in the market. 

While the yearly APR is incredible, the daily interest rate is actually more important in my opinion.  Unlike other services where you lend your coins to the service and can be paid a constant interest rate.  On KuCoin, you are lending directly to a borrower.  While there is a maximum time-duration for the loan, the borrowers are able to pay off the loan early if they choose.  For example, if someone borrowed bitcoin for a duration loan of 28 days, but instead paid off the loan after only one day.  That would result in them only having to pay one day’s worth of interest; saving the borrower money.  Then, your coins would be returned to you and sitting idle in your account.  For those of us trying to earn as large of a passive income as possible, we don’t want to have those coins sitting idly by and not earning interest.  

When this happens, there are two options for you. You can take a very active approach by often checking the status of what you’re lending.  Once fully paid and returned to your account, you can quickly manually choose a new loan offer to accept and continue the process each time that you’re paid back. Hopefully having good timing and not too much downtime between loans.

If that sounds like too much effort for you, KuCoin does offer an auto-lend feature. 

The auto-lend feature works exactly as you would expect.  Once your loan is completed and your funds are returned to you, it will automatically pick a new loan for you that fits into the parameters that you have set.  You can choose how much you want to lend out, the time duration, and how much minimum daily interest you’re wanting to receive.  Once the system finds an offer that fits all of these categories, it will automatically start that loan.  When that loan is finished, the whole process will repeat again.  If you are hoping to keep this process as passive as possible; just setting it and walking away.  Then the auto-lend feature might be exactly what you’re looking for.

Ease-Of-Use

On most lending services the coins that are offered for lending are often the biggest coins out there.  Typically limited to a handful of coins, those with the largest market caps. But, if your portfolio consists of other coins, then you will usually be out of luck if you were wanting to lend them out. KuCoin is different in this regard as well.  They now have well over a hundred coins that you can lend out and also borrow, making it very likely that you’ll be able to lend out the coin of your choice.

Another important factor for me when deciding whether to use a lending service is the lockup periods for your coins. Some places will require you to lock up your coins for an extremely long time in order to receive the best rates.  KuCoin also does this very well, and the duration of the loan has no affect on receiving a higher interest rate, just the amount of time that you will be receiving interest for.  They allow you to choose whichever duration appeals the most to you.  Ranging from 7 days, 14 days and also 28 days.  Each of those options offer incredible rates. Again, another positive for KuCoin.

While looking in from the outside, you might think that having to manually pick your own loans or setting up the auto-lend feature may be difficult, time consuming or even cumbersome.  That was my initial opinion before looking into it closer, but after researching it I had the complete opposite opinion.  I found it to be very empowering to have full control of how you will lend your coins, and how much interest you will receive for doing so. While admittedly it isn’t as easy as just depositing it into a service and forgetting about it.  There are only a few extra steps that are required and it isn’t complicated at all.  After your first few times performing a loan it will have already become second nature for you. You may even grow to enjoy the level of control you have over the whole process like I have.

Advantages

 The great advantage with lending crypto on KuCoin is that you hold all of the power and have full control over how you want to do things.  As I mentioned before, you can choose which borrowing deal you want to lend to, picking the interest rates, time duration and coins that appeal to you.  If that all sounds like too much effort, they offer an auto-lend feature that truly makes this a form of passive income.  Allowing your desired levels to be met, meaning that you no longer would need to be continuing searching for the next great place to lend your coins.  And then there are the great rates that are available for lending.

While all of those things are amazing in their own right and alone might be enough to convince me to lend on KuCoin; there was something else that appealed to me even more. Knowing exactly how your interest rates will be paid, and the fees that are taken out of those earnings, along with insurance fees.  For me at least, it gives me a lot of peace of mind, especially when many rival services are very secretive about how they earn the money to pay their interest rates, or how they’ll handle situations if things ever go wrong.   

I must admit that I was thoroughly impressed with my experience with KuCoin's Crypto Lend feature.  As I said at the beginning of the article, the crypto lending environment has become a mess recently, where rates are dropping rapidly and you have little to no control of your coins or what happens with them after lending them out to 3rd parties.  KuCoin offers an option with auto-lending for those who want the whole process taken care of for them and remain 100% passive.  But you can also be more active and choose who you lend out to manually, which might give you an opportunity to get even higher interest rates.  Being able to choose how long you want to lock up your coins is another plus that I was very happy to see.  Then adding in the fact that the amount of different coins that are available for lending is larger than you will find on most of the rival services. KuCoin also passed in all three areas of my main criteria of having security & openness, great interest rates and also ease-of-use. While I was skeptical before I looked into KuCoin, my opinion has been changed and I'm excited to continue to use their product more in the future. 

If you want to learn more or have any questions. KuCoin has a great article where you can learn more HERE.

If you want to use their lending service go here.

KuCoin Crypto Lending

In part 2 of my deep-dive on earning passive income with KuCoin I will be looking at their Staking and Trading Bot service. The article will come out later this week, so please look forward to it. 

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As always, thank you for reading!