4.2% of people in the world own some form of cryptocurrency. So chances are, you’ve heard of cryptos and even own some yourself.
Most crypto investors are comfortable just buying and selling. But that takes active effort for you to turn a profit.
What if we told you that there’s a way to make passive income from crypto? It’s called staking and only requires you to lock your assets for a period of time to assist the blockchain.
If you’re interested in learning more, then keep reading. We’ll show you the most profitable ways to stake cryptocurrencies.
Pick the Right Cryptos
First off, you can’t stake all cryptos. Most of the big names like Bitcoin use proof-of-work (PoW) systems, which require people to solve math problems to validate transactions. This creates new blocks and rewards the participants (usually with some coins).
You can only stake cryptos that use proof-of-stake (PoS) systems. You also validate transactions and create new blocks here, but the mechanism is through the coins they offer as collateral. So Bitcoin’s out of the question here.
When looking over cryptos, you’ll want to pick one with a high annual percentage yield (APY). This means that understanding staking rewards and expecting fluctuations in the market will help. You’ll realize that APYs aren’t guarantees, but rather, are estimates.
In general, some top choices include:
- Cardano (ADA)
- Cosmos (ATOM)
- Tezos (XTZ)
Consider the Fees
Crypto staking platforms will set their own fees to make up for losses and make a decent profit. So you need to read the fine print and look past the base staking rewards listed.
Not only will platforms charge you a fee for using their site, but other types they may charge include transaction, withdrawal, liquidity, and network fees. Make sure you understand these and weigh them up with the rewards to decide which platform works best for your needs.
If you search hard enough, you might be able to find a staking platform that doesn’t charge fees.
Diversify Your Portfolio
One of the biggest pieces of advice that stock investors will tell you is to diversify your portfolio. The same goes for staking cryptocurrencies.
You never want to put all your eggs into one basket. If that investment fails, then all your money’s gone.
Instead, choose one main crypto to put your money in, but also, spread the rest of your money across others. Should any of the cryptos dive in value, you have other ones that may soar instead.
Keep an Eye on the Market
Staking crypto can be a fantastic way to earn passive income, but you still need to put in some effort to maximize your profits. You can’t just stake blindly without adjusting your tactics from time to time.
The reality is, the market will fluctuate. You need to be proactive and monitor market trends to stay ahead of the curve. If you’re always prepared to adjust your investments, then you’ll minimize losses and make a killing off of crypto staking.
Consult With a Financial Professional
You might be tempted to throw all your life savings into staking, but that’s not a good idea at all. Even putting part of your savings in can be financially devastating if the worst-case scenario happens, so you need to invest wisely.
Even if it seems like you have plenty of money to invest, speaking with a financial professional is the best course of action. They have the knowledge and experience to evaluate your personal situation and discuss what’s feasible for you to invest.
While this isn’t a method to profit off of crypto staking, it’s certainly a way to prevent you from falling into financial ruin. If you know approximately how much you can take out of savings, then you’ll still have a decent cushion, should staking fail.
Join a Staking Pool
You can stake crypto on your own, so many think this is the most profitable method. However, like with crypto mining, you need expensive equipment and will have to pay high utility bills since running your own validator node will use a lot of energy.
While you won’t have to share rewards with others, the above factors make it not worth it to go solo. Plus, you’ll have a lower chance of earning rewards.
The better option is to join a staking pool. You’ll combine resources with others, which increases your chance of validation blocks. As a result, you’ll get more staking rewards, even though you have to split it with the others.
Try Delegated Proof of Stake (DPoS)
When using a staking platform, you’re required to perform a consensus function yourself. But as the name suggests, DPoS allows you to delegate your tokens to validators. In turn, they’ll perform the consensus function for you.
DPoS doesn’t require powerful equipment, which drastically reduces environmental harm. So if this is important to you, then it’s a nice bonus.
The main advantage of using DPoS is that its consensus mechanisms are much faster than other staking methods. This means it has a high transaction capacity, so you can earn rewards faster.
Reinvest Your Rewards
Have you noticed that one crypto’s doing much better than the others? Then it can be worth reinvesting your rewards into it.
This doesn’t directly increase your profits, but it does create a positive cycle. The more money you put back into a cryptocurrency, the more likely it’ll increase your overall returns, as you’re helping the crypto grow.
Do keep in mind that this requires patience and some market intelligence. Reinvestments will typically have a positive long-term effect.
Make a Nice Profit off of Crypto Staking
Cryptocurrencies are the way to our future, and they’re quickly becoming mainstream alongside fiat currencies.
If you’re already trading cryptos, then you’re on a good start to staking. Just remember that before you give it a try, consult with a financial professional to make smart decisions. And spread out your investments while monitoring the market to avoid significant losses.
For more finance tips, keep reading our blog page now.
