“How Much Can I Earn by Staking Crypto?” Potential Passive Income from Cryptocurrency Holdings Depends on Due Diligence Before Investing.

3 min read

The question on most people’s minds The answer is it depends. There are a few factors to consider, such as the cryptocurrency you’re staking, the staking rewards, and the staking pool you join. First things first, let’s start with the basics. Staking is holding and locking up your cryptocurrency to support the network’s operations.

It’s like depositing money in a savings account and earning interest. When you stake your crypto, you help validate transactions on the network, and as a reward, you gain additional cryptocurrency.

Annual percentage returns vary by cryptocurrency type and also by platform or fund. However, there is also an element of supply and demand in returns. 

Traditional Staking

In traditional staking, the returns increase if the network needs more 

cryptocurrencies for validation. When the network has more capacity than is required, revenues decrease.

Many prevalent cryptocurrencies that are used for betting pay rewards between 3% and 9% APY. However, some may pay a lot more, especially when you decide to lend your crypto.

Assuming traditional staking, you can see returns of around 5% for Ethereum, while Avalanche provides returns of over 9%.

Let’s take a look at an example. Say you want to stake 1,000 ADA (Cardano). If you decide to stake on your own, you’ll earn around 7.5% annually, translating to 75 ADA per year. However, if you join a staking pool that charges a 3% fee, you’ll earn slightly less, around 7.2% per year, but you’ll earn more ADA overall because the pool will have more staked ADA.

Similar to a savings account or bank CD that you can roll over, stakes allow you to use compound interest to make more money work over time. Your interest (paid in rewards) can earn its interest (more rewards).

For example, AVAX is trading for just $75; you will need 25 AVAX to start staking. Assuming a 9% APY, an investment of $1,875 (25 AVAX) would return $168.75 after 12 months. In the next 12 months, the balance of $2,043.75 (including first-year rewards) can produce an additional $183.94 without adding new tokens to the stake.

Of course, you will be paid your rewards in the crypto you bet rather than dollars, but dollars offer a convenient way to understand earnings.

Cryptocurrency

Different cryptocurrencies have different staking rewards, and the amount you can earn varies from coin to coin. For example, the current annual yield for staking Ethereum is around 5%, while staking Cardano can earn you up to 7.5% annually. Researching and understanding the staking rewards for the cryptocurrency you’re interested in is essential.

Staking Rewards

Staking rewards are the cryptocurrency you can earn for staking your coins. They’re usually paid out in the same cryptocurrency that you’re staking. Staking rewards vary depending on the cryptocurrency, and they can change over time due to factors such as supply and demand.

For example, if you’re staking Cosmos (ATOM), the current staking rewards are around 7.5% per year. If you stake 100 ATOM, you’ll earn approximately 7.5 ATOM annually.

Staking Pool

Staking pools are groups of people who join together to stake their cryptocurrency. They can increase their chances of earning staking rewards by pooling their resources. Staking pools charge fees for their services, usually around 1-5% of the staking rewards.

When you join a staking pool, you’re delegating your stake to the pool. The pool will use your stake to help validate transactions on the network, and in return, you’ll earn a portion of the staking rewards.

Staking Crypto Calculator

The profitability of the stake depends mainly on the annual APY and the fluctuation of the price of the bet cryptocurrency. Let’s look at an example that better illustrates this dynamic.

If you stake 10 ETH tokens, each trading at $2,000 through Uphold, which offers 7% APY on ETH, you will get a 7% return on your $20,000 investment at the end of the first year is $1,400. So your total ETH balance will be $21,400. If you keep your ETH staked for another year at 7%, your entire balance will increase to $22,898, and so on.

However, it is essential to note that you expose yourself to the price volatility of the asset you are staking on whenever your stake it. For example, if you stake Ethereum at 7% APY, but the token loses 7% of its value in one year, you have only broken even.

Of course, ETH often fluctuates much more than just 7%, so it’s essential to remember that while a high annual APY may look attractive on paper, your actual profitability is heavily dependent on asset price fluctuations. 

Conclusion

Staking crypto can be a great way to earn passive income from your cryptocurrency holdings. By understanding the staking rewards for different coins, joining staking pools, and researching, you can potentially make significant returns on your investment. However, it’s important to remember that staking comes with risks, and you should always do your due diligence before investing.

If you’re interested in staking crypto, explore different platforms and coins and start small to understand how staking works. With some research and patience, staking can be a rewarding way to earn additional cryptocurrency and support the network.

Similar to a savings account or bank CD that you can roll over, bets allow you to use compound interest to make more money work over time. Your interest (paid in rewards) can earn its interest (more rewards).

Of course, you will be paid your rewards in the crypto you bet rather than dollars, but dollars offer a convenient way to understand earnings.

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