KuCoin is a cryptocurrency exchange that was launched in 2017 and has since become one of the most popular exchanges for trading altcoins. The exchange lists well over 100 different cryptocurrencies, and regularly exceeds $1 billion in 24-hour trading volume.
Lending cryptocurrency on KuCoin can be a solid source of passive income
However, KuCoin offers more than just spot markets. The exchange has launched a full suite of products including futures contracts, margin trading, leveraged tokens and more. In this article, we’ll be taking a look at lending on KuCoin, which can be a good way of putting your cryptocurrencies to work and getting some additional gains on your crypto holdings. At the time of writing, KuCoin supports lending for more than 70 different cryptocurrencies.
When you’re lending your crypto on KuCoin, you’re providing your crypto to users who are trading on margin. These traders borrow funds in order to leverage their position, and pay interest to lenders in return. You can choose to lend your cryptocurrencies on different terms – KuCoin currently offers 7-day, 14-day and 28-day lending terms.
Before we get started, we have to point out some of the risks that are involved with lending cryptocurrency on exchanges like KuCoin. Even though lending is typically less risky than active trading, that doesn’t mean that it doesn’t have any risks. Cryptocurrency lending is largely unregulated, which means you might have limited recourse if you run into any issues. Holding cryptocurrency on a centralized exchange can also be risky, as you don’t have control over the private keys associated with your cryptocurrency. Issues with the exchange’s risk management system for lending and margin trading could also cause losses.
You should also keep in mind that you can’t use your cryptocurrencies while you’re lending them for staking, trading, transactions and other purposes.
Now, let’s go through the process of lending cryptocurrencies on KuCoin.
1. Create a KuCoin account
If you don’t have an account with KuCoin yet, you’ll have to create one before you can start trading on the exchange. The signup process is simple and should only take you a few minutes.
2. Deposit crypto to your KuCoin account
After you sign up to KuCoin, you’ll have to fund your account with some cryptocurrency. This could either be the cryptocurrency that you’re planning to lend, or another coin that you want to exchange to the cryptocurrency you will be lending.
In order to deposit cryptocurrency to KuCoin, head over to the Assets section in the top right corner of the interface.
On KuCoin, your assets are divided into 5 categories:
- Main Account (from where you can transfer the funds to all other accounts)
Since we’re depositing funds to KuCoin for the first time, we’ll need to go to the Main Account section first. In our example, we’ll be depositing Tether (USDT) via the TRON blockchain’s TRC20 token standard. Since we’ll be making our deposit through the TRON blockchain, the fees will be very low and our transaction should complete relatively quickly, in about two minutes.
Under the USDT section, click on “Deposit” and then either copy the deposit address or scan the QR code provided by the exchange with your wallet. For cryptocurrencies like USDT, which are available on multiple blockchain platforms, make sure to select the appropriate blockchain. In our example, we want to transfer USDT tokens that we have on the TRON blockchain, so we select TRC20.
Important: Make sure that you select the right blockchain platform! Sending tokens to an invalid address can result in a loss of funds.
After making the transaction with your wallet, you should see the funds in your KuCoin account within a couple of minutes. If you’re depositing slower cryptocurrencies such as Bitcoin, you might have to wait a bit longer.
Once the cryptocurrency is in your account, you can simply click the “Lend” option to get started with lending.
3. Enable margin trading
If you’re using the lending option for the first time, you’ll first need to enable margin trading.
Margin trading is risky, and there’s an additional step you’ll have to take to enable it on KuCoin. You will need to confirm the margin Trading Agreement: I Have Read the Terms and Understand the Trading Risks.
If you don’t understand the risks involved in margin trading, don’t lend cryptocurrency or trade with leverage.
If KuCoin also has any promotions related to margin trading, you might see a pop up like this:
4. Choose the cryptocurrency you want to lend
As we’ve mentioned before, you can lend over 70 different cryptocurrencies on KuCoin. Use the search bar to find the cryptocurrency that you want to lend.
5. Choose between Manual Lending or Auto Lending
When you’re lending on KuCoin, you’ll have an option between two lending types: Manual Lending and Auto-Lending. Here’s how each of these options works.
On the right, you can see the current offers sorted by annualized returns. Generally, the returns are higher when the cryptocurrency market is bullish, as more traders are borrowing funds to long the market.
The daily interest rate needs to be between 0% and 2%. In our example, the optimal rate is 0.128% (APY ~46.7%), and if we make an offer for 0.128% daily, we can expect someone will take it rather quickly.
For this example, we decided to try and lend 18 USDT for 1% daily interest. Since the optimal rate is 0.128%, it’s very unlikely that anyone will accept our offer.
After the funds are returned, they are not lent again automatically. You need to do it manually and the borrower can return them at any time, regardless of the duration of the term.
Similarly to the Manual Lending, we can also dictate the lending terms with Auto-Lending, but once the funds are returned, the system will automatically lend out the available funds at the priority interest rate. If the current priority interest rate is lower than your pre-set minimum day rate, the system will place the lending order at your pre-set rate.
You can take advantage of this option by enabling the Auto-Lend option. If you’d like to lend all your assets, you’ll need to set the reserved amount to 0.
When the balance in your Main Account is greater than the specified amount reserved, the system will lend out the extra amount of funds automatically.
Tip: Generally, you’ll get the best returns by choosing 7-day lending terms.
6. Check your lending positions
You can check your open lending position under the “My Lendings” section.
You can check the details of all your lending positions by clicking on “Check Details”. Here, you also have the option of cancelling a lending position.
The bottom line
Lending cryptocurrency can be a good way of earning extra income on cryptocurrency that would otherwise be just sitting in your account. Even though there are some risks involved with lending on a cryptocurrency exchange, it’s definitely an option that’s worth considering, especially if you’re not interested in pursuing a more active strategy. KuCoin is a solid option for lending because it supports a large variety of cryptocurrencies and gives lenders a significant amount of flexibility.
Source link: https://coincodex.com/article/12798/how-to-lend-cryptocurrency-on-kucoin-earn-passive-income-with-your-crypto/