Among the various crypto side hustles, staking is one of the best options. The returns you receive depends on your investment size, Annual Percentage Yield (APY) rate of coin, and also price fluctuations of the coin. With the right combination of strategies, it can also give better returns. For example, you can stake multiple coins of skyrocketing crypto projects to have increased chances of higher returns.
Annual Percentage Yield (APY) determines how much interest you earn annually. If a coin has APY of 10% on a staking platform and you stake $500 worth of crypto, you will earn $50 which is 10% of your investments after a year. During this time, if price of crypto decreases, you may also face losses. Stablecoin staking, in comparison to this, is less risky because the price of stablecoin remains the same during the lockup period, and you may not face any losses. But stablecoins have lower APY rates and do not provide high profits. To overcome this and to secure higher profits, you can diversify your investments. Stake multiple coins especially those who are bullish in long-term, to have higher chances of good profits. We will explore specific strategies that can yield high profits. But this must not be taken as investment advice because the market conditions can vary significantly.
How Staking Works?
Staking is used to validate transactions for blockchain that use Proof-of-Stake mechanism. In the process, you lock your crypto assets in a staking contract for a specific blockchain and use the staking software. Direct staking and delegate staking are two ways of doing this. In direct staking, you run the validator node through a software and monitor the activity. It also requires technical expertise and may not be good option for beginners. So, our main focus of this article would be delegate staking. In delegate staking, you give your assets to a third party to perform staking on your behalf. Delegate staking is easier and requires you to simply deposit your crypto assets on a third-party platform like crypto exchange or specialized staking platforms and wait for rewards to come. These platforms also provide specific APY rate which determines your returns. OKX and Binance are some of the crypto exchanges that provide very high APY rates at various coins allowing users to earn good profits.
Stablecoin & Flexible Staking
When you lock your assets in a contract, you cannot access them for specified period of time. You may lose some of the crypto if price decreases. To overcome this, you can also try flexible staking options if available on a staking platform. With this option, you can unstake and access your assets at any time. Second low-risk method is stablecoin staking. You can simply stake stablecoins and get specified returns based on APY rate without losing any crypto because price of these cryptocurrencies does not fluctuate. The only risk involved is the failure of platform or platform getting hacked. We put both these methods in the list of low-risk methods.
Fixed Staking
Fixed staking process in which you cannot unstake your assets, carries higher risk compared to flexible staking. But this option also gives higher profits because of higher APY rates it offers. Platforms like Binance offer both flexible and fixed staking options for the same cryptocurrency.
The risk that staking normal cryptocurrencies carries, depends largely on price fluctuations and market conditions of the coin that you are staking. This method combined with fixed staking terms, has higher risk than stablecoin staking and flexible staking. But this method also offers higher APY rates and good profits.
If you choose to proceed with this method, you must research about the market conditions and price trends of the coin that you want to stake. This way, you can be aware of future price of the coin and manage the risk.
Staking Strategies
- Diversified Investment
The best strategy that professional crypto investors use in staking is the diversified investment strategy. You simply stake multiple coins that have long-term bullish trend and you also stake stablecoins, to maximize the chances of higher profits. This strategy requires doing technical analysis and research about the coins that you want to stake. Observing the price trends, and market events for the coin can be helpful in your strategy. It may take more effort but the returns can be lucrative.
2. Investment in New Projects
You can also stake coins from the new crypto projects that are skyrocketing. Through this strategy, your investment amount would also increase by price surge, and additionally, you also earn staking profit. By following top crypto news sources, and tracking platforms like Coinmarketcap, you can find such crypto projects. Some of the coins have great potential for growth. This method also has some risk that’s why you should allocate small portion of your investment to this rather than allocating whole portion.
3. Utilize Investment Calculators
Additionally, you can also use staking rewards calculator to calculate the annual returns depending on the size of your investment. This tool provides a graph and estimate of annual returns based on staking amount, asset and stake conditions you provide. However, these estimates are based on inputs provided and do not account for events like crypto market volatility.
Conclusion
If you want to earn passive income with crypto, then staking would be one of the best options for you. Unlike trading, staking only involves locking your assets for a period of time and then you earn rewards. With the right strategies, you can generate good profits with your crypto. In the process, managing the risk by using your knowledge of crypto market is necessary. Additional tools like staking profit calculator might be helpful to aid you in the process.