Staking & Passive Income – A Must For Every Portfolio

One Of Crypto’s Most Attractive Qualities

Regardless of your risk tolerance, I believe every portfolio should incorporate staking, as a means of passive income. For those with a much lower risk tolerance, a more reserved approach is advisable. However, if you are taking part in authentic staking, to secure a particular blockchain, the risks are considerably lower than that of being a liquidity provider on an AMM, or any other alternative. Essentially, authentic Proof-of-Stake is relatively safe. However, one should always remember that risk is inherent in any financial product, or asset.

Something that we have discussed at length on this blog is the early discovery of future Proof-of-Stake gems. Particularly, projects with an attractive APR. Getting in on one or two of these projects during their formative stages can be extremely lucrative in the long term. For example, a project that goes on to perform a 20X and has a 10% staking reward will produce a 200% return on your initial investment every year. This is what investors need to look out for. Not only a healthy staking reward but the potential of significant price appreciation as well.

There are several newer projects, as well as some that have remained under the radar, that could soon accomplish the abovementioned outcome. However, waiting to see which projects rise to the challenge defeats the purpose of such a strategy. The power lies in early access, and not much else. Earning interest on a cash deposit is the opposite of a well-executed staking strategy. Inflation produces diminishing returns. Even though staking projects are inflationary by design, the dynamic has little to no effect, thanks to significant price appreciation.

This excessive price appreciation is largely due to the discovery, adoption, and use case of an entirely new brand, and service. Essentially, it’s like a company beginning its journey at a zero valuation. The initial surge is enormous, and as an investor, you want to capture this dynamic in the form of an early investment and then harness its strength through the power of staking. Simply purchasing a PoS project and then putting those coins to work is not sufficient.

Higher Multiples

The APR must in turn be multiplied by an ever-expanding token valuation if you are to experience the desired results. The bull market dynamic helps to create such an outcome. However, a project primed for significant upside, together with the bull market dynamic, increases the multiples of this mathematical formula. Over the past few months, we have looked at several projects that could eventually fall into this category.

One of these projects is Taraxa, a micro-cap with an exceptionally attractive staking reward. The market cap is still rather insignificant, despite an initial surge in the final half of 2023. There are also several viable options within the Polkadot ecosystem. Some great little projects could go on to experience significant expansion this year, and even into 2025. Unfortunately, a bear market is counterintuitive to this idea. However, there are several creative solutions to this dilemma.

Not only that, but alts don’t drop by 95% overnight. This is a gradual slump that eventually gains momentum. The fact that most market participants are unable to discern the commencement of a bear market is evidence of this. There is time to execute counter strategies. The key is to get in early, compound rewards, and then cash out those rewards as close to the peak as possible. However, you have to make your calls now.

Final Thoughts

I am looking to create a synergetic element by leveraging micro-caps that simultaneously offer great staking rewards. Projects that can offer great price appreciation, and then have those gains being compounded by staking rewards. There are several great options out there at the moment. During these formative stages, I have also chosen to actively trade some of these holdings, to increase them. This creates even further compounding, and will hopefully have a great outcome. Keep stacking, and see you next time!

Disclaimer

First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.

This article was first published on Sapphire Crypto.

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