Is there a best moment to start staking cryptocurrency? This article explains the best time to stake crypto for those who are in it for the long term.
Staking cryptocurrency is a popular way among crypto-enthusiasts to earn a side income passively. Moreover, staking is an easy way to earn crypto returns by providing your holdings to a crypto wallet. The next step is just locking up your coins for a specific time.
For example, if you are a long-term ‘HODLER’ of Ethereum(ETH) cryptocurrency and have some skin in the game, why not earn some additional tokens by locking up your coins? Just send the tokens to a specific contract address on the blockchain and hold them there.
Mainly, there is no specific time window or deadline involved when participating in a staking contract. At any time and regardless of where you are in the world, you can decide to stake crypto. Remember that during this time your coins will be locked and not available for trading or spending.
After all, you are putting your crypto to work and getting rewarded for it.
What is The Best Time to Stake Crypto?
The very best time to stake crypto is hard to pinpoint. Staking cryptocurrency is not the same as performing a trade on an exchange or timing a crypto investment. However, the crypto markets are known and feared for their volatility so it could matter when to do this.
Specifically, if you are serious about a certain coin and want to hold this coin for a very long time. Starting to stake your coins would be a perfect strategy. First of all, by locking up the coins you are helping the network become more secure as you are delegating to validator nodes.
Also, if you lock up your coins you are rewarded with new coins every time when new blocks are validated and mined. This way you are increasing your favorite crypto holdings without the need to trade or do any additional work.
That sounds great, isn’t it? No sleepless nights about volatile markets or coins being at risk by bad actors. So, is there a best time to start staking cryptocurrency?
In my opinion, if you are a long-term holder of a specific Proof-Of-Stake coin then your plan is to hold it for a long time. In other words, you decide to invest in a cryptocurrency to make some serious gains in the future ahead.
Traditional Stock Markets vs Crypto
If you are acting this way you are no different from any stock investor in the traditional markets. For instance, many long-term stock investors mostly buy stocks that have dividends as additional passive income. Investing this way is no different from buying and staking PoS coins.
So what is the best moment to time the markets? Long-term investors, no matter what assets they are buying are interested when markets are down. This doesn’t mean a single red day in the markets when everything is down 3%.
No, I’m talking about a serious drop or event in the markets where everything is down more than 50% from the previous ATH(*). At times like this, there is a recession, a lot of fear and uncertainty(FUD) in the markets, and low investor demand. If you translate this to the crypto markets you can say that there is a crypto-winter going on.
Finally, when markets recover you can expect a period of growing interest with rising prices leading to multi-digit gains 😊.
(*ATH) – Stands for All-Time High or the highest point of the markets so far.
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Is Crypto Staking the same as Bitcoin Mining?
Crypto staking involves a PoS (Proof of Stake) consensus mechanism, which is different from Bitcoin’s PoW (Proof of Work). If you are not familiar with crypto mining then you must already know that cryptocurrencies are being minted within a decentralized network.
In short, Bitcoin uses a hardware solution for this which is called Proof of Work. On the other hand, there are software solutions called Proof of Stake(PoS) that cryptos like Ethereum and Solana are using to mint new coins.
By staking your coins, you help secure the network and earn rewards while doing so.
How Does Crypto staking Work?
In general, when you stake crypto from a wallet you do this by delegating your tokens to validators who process transactions and run the network.
Delegating a stake is a shared-risk shared-reward financial model that may provide returns to holders of tokens delegated for a long period. This is achieved by aligning the financial incentives of the token-holders (delegators) and the validators to whom they delegate.
Additionally, the returns or yield for staked tokens is based on the current inflation rate, the total number of coins staked on the network, and an individual validator’s uptime and commission (fee).
Ultimately, no specific technical expertise or investment in costly hardware devices is needed. You just simply lock up your coins in a wallet and get rewarded while you sleep! 😄
How long Should Crypto be Staking?
Most of the bigger crypto platforms like Binance and Kraken offer staking solutions. The way this works is that you can stake crypto for different periods of time. At Binance, for example, you have three lock-up periods(30, 60, and 90 days).
Particularly, the way this works is that you deposit and lock up crypto in custodial wallets. Note that during this period you cannot trade, un-stake, or send the funds elsewhere. At the end of the staking period, the funds including profits will be returned to your spot wallet.
Is Crypto Staking Profitable?
Staking on these exchanges is free and gives much higher than any returns you would see from a traditional banking system. You can compare your crypto holdings with stocks and dividends mentioned earlier.
In particular, crypto staking is a form of passive income, as you really don’t have to do much other than stake your original investment. Instead of just having your crypto sitting in a digital wallet, staking it provides utility to the broader blockchain network, and can really reward you with some handsome returns.
Recommended read: 7 reasons why you should be staking your crypto.
Which Cryptos Can I Stake?
The most popular and famous crypto you can stake is Ethereum(ETH). Soon this cryptocurrency will be upgrading its network to Proof-Of-Stake(PoS) instead of Proof-Of-Work(hardware mining). At the moment it is already possible to lock up ETH in a staking contract.
Staking ETH can be very profitable as it is the second crypto in market cap, and has the highest utility in terms of DeFi and dApps. You can consider the rewards earned with ETH as an extra bonus to your crypto portfolio.
Other popular Proof-Of-Stake cryptos are Polkadot(DOT), Solana(SOL), Avalanche(AVAX), and Polygon(MATIC). Note that these are not all and there are many more cryptocurrencies who already implemented the Proof-Of-Stake mechanism.
Can you Lose Crypto when Staking?
In short, yes there is a risk when staking cryptocurrency. However, when you deposit funds in a staking contract or exchange wallet then the risk of losing crypto is very low.
On the flip side, there are risks when you decide to run a node-validator on the Ethereum or Cosmos network. Node validators are specific types of computers in the network that validate transactions. Of course, node validators are rewarded very nicely but there is a risk of losing the funds. This process is called slashing.
For example, in the case of Cosmos, if a validator is down for more than 5% of the last 10,000 blocks (that is, it is offline for more than 13 hours), the slashing amount is 0.01%. Moreover, the validator is also removed from the consensus and does not earn rewards for at least 10 minutes.
Other Best Times To Stake Crypto
Besides starting to stake cryptocurrency when markets are down only could leave you out of the markets for a long time. Of course, staking cryptocurrency doesn’t depend on market action only but also on the community and developers behind the coin.
Moreover, these projects didn’t exist in the previous bull run of 2017/2018. Additionally, these coins appeared in the last bull cycle and are offering staking solutions as well. All in all, these crypto projects gained double or triple digits 😁.
Over the years the entire crypto market has grown from hundreds of altcoins in 2013 to more than 20K(!) in 2022. It’s all up to you to do some proper research and find the hidden gems in the markets.
Conclusion: What Is The Best Time To Stake Crypto?
Crypto staking is an awesome way to gain some passive income from your crypto investments. If you are looking to start staking, head to one of the larger, more trusted exchanges like Binance where you can earn up to 10%.
Of course, when you are serious and want to hold for the long run, the best time to start stake crypto is when markets are down. Good luck in your crypto journey!
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