I think by now we have all seen those ads that promise (and likely, also deliver) some interest on cryptocurrency deposits. How many of us have used these? Are they popular? Whether they are or not, I'm here to explain to you why YOU DON'T WANT TO DO THAT.
Basically the only reason why somebody will pay you interest for keeping cryptos in their accounts is because they will EARN more interest than they pay you. That should be a given, and for many of us it might be. However, many times the reasoning stops there. I'm here to delve a little into the nitty gritty of such interest earnings by those who will pay you some.
There is one trading mechanic which universally does this, no matter which asset class is considered: short selling. Basically, short sellers sell things (cryptos, in this case) that don't belong to them. Technically, behind the scenes, this crypto is borrowed and the short-seller pays interest to the financial institution that borrows and sells this asset for them. It is a part of this interest paid which comes back to you if you deposit in such an account.
You might think "well that's OK, I don't mind the occasional speculator paying me interest on my crypto". And that's where you are wrong. Sure, there are certainly "occasional speculators" that short cryptos. However, by far the biggest players are institutions, which short cryptos for various agendas, including a fairly secret central bank agenda to keep cryptocurrency values down, so that their political fiats don't look too bad, in a period where all the major central banks ARE PRINTING MONEY LIKE UTTER INSANITY.
Let's be clear: If there's 10 apples in the economy and 10 dollars, each apple is worth a dollar. You double the number of dollars, each apple is worth 2 dollars, which means these "new" dollars are worth half what they used to. This is universal and absolute. There is no avoiding this.
How then are the central banks (which are basically ONE organization worldwide) able to maintain the perceived value of their currencies while multiplying the monetary mass like utter madmen? One of the ways to do this is by manipulating the price of the other asset classes - such as cryptocurrencies, by shorting them. And gold/silver. And so on.
Now before you scoff and scream that I am a madman, I assure you I am not: I have decades' experience in trading securities, including derivatives, and central bank operations are not a mystery to me. I am not wrong in what I explain here. It might seem terribly unlikely to you, I can understand that. So please, if there's something you think is wrong with this post, ask questions, and they will be answered.
So the TLDR is this: by earning a tiny amount of interest on your cryptos, you are contributing to their value not increasing, or even decreasing. Please stop, and let your favorite asset class be valued fairly.