DeFi Is Great, But PoS Still Has Benefits Investors Shouldn’t Ignore
New opportunities in Proof-of-Stake (PoS) projects are emerging as market cycles evolve, creating conditions that specifically benefit PoS projects and ultimately enable passive income in the Crypto space. PoS projects have a long track record of offering staking rewards that can help offset bearish market conditions while simultaneously providing passive income to holders. With the shift to DeFi over the past year or two, PoS coins have taken a bit of a back seat.
PoS projects do, however, have benefits: they are generally much more stable, provided you select the blue chips. Recently, Hive Backed Dollars (HBD) saw its savings APR increase to 15%, which is pretty phenomenal for a stablecoin. During a bearish or uncertain market, solid PoS coins and stablecoin yields can offer a much safer form of passive income. This could even be considered hedging, as an increase in coins is, in essence, offsetting loss. I discuss this idea in a recent article.
Even if the bearish price action of a particular period is significant, one tends to see the real casualties after months of downward action. That is why strong bearish moves, especially prolonged moves, will always see a shift to quality. Many Layer1 alternatives are PoS coins and will generally be a good option for those who choose to remain exposed in a Crypto downturn. Once a bear market has reached a certain point in time and pain, DeFi projects tend to suffer severely.
Fairly Good APR For PoS Projects: Where Staking Rewards Still Make Sense
Sifting through PoS projects and stablecoin options is important rather than just selecting any option. If you do your homework and find some stellar opportunities, the yields can be relatively good. The quality zone ranges from 7% to 12%, which is at least a much-needed support level in a bear market. Polkadot (DOT) is another great staking opportunity.
Though we might not necessarily be in a full-blown bear market, it is always good to be aware of your options should things suddenly take a turn for the worse. Further accumulation of these projects at the ground level of any bearish season can also be extremely powerful in the long term. Long-term investors in the Crypto space often have the upper hand, as they can ride out periods of intense volatility.
Safety Concerns
DeFi projects are known to suffer hacks, exploits, and rug pulls. This does raise concerns regarding the safety of allocated capital. This is why diversification is key. Investors have to sacrifice gains for security, at least in the majority of their portfolios. Having complete exposure to high-risk investments is extremely unwise. A well-planned mix of risk exposure is imperative to maintain a steady income and a relatively good measure of security.
In essence, potential risks are a lot lower in PoS than in DeFi. Even DeFi operations with a strong reputation are at risk. A good reputation also means a good TVL, which is obviously more attractive to scammers and hackers. Essentially, traditional PoS is a lot safer than DeFi opportunities, such as providing liquidity on a DEX.
A Very Wise Move For The Bottom Of A Bear Market (Crypto Strategy Explained)
This is something I have often addressed in the context of staking projects. It is extremely powerful if executed at the appropriate time. Obviously, purchasing a project in its infancy is first prize, but making the most of a brutal sell-off is also a really good opportunity. Purchasing a project that is down 90% can become a massive passive income generator once the price regains its previous high.
If the annual APR is 10%, then investors would generate a 100% return on their investment every year. The APR is now, in essence, 10X because it is based on a coin allocation rather than a dollar basis, as with your bank. This should be a strategy for those looking for great passive income generators. Buying PoS coins in the depths of a bear market can help to bolster your economy and simultaneously hedge your portfolio.
Is PoS A Good Long-Term Strategy In Crypto?
The accumulation of high-quality PoS projects is also something one can work towards. Let’s be honest, it’s great to have a goal to work towards. Seeing your stack grow over time can also be rewarding in its own right, knowing that it will eventually produce supplementary income. Continued accumulation in the dips and crashes can definitely be beneficial years down the line, once the Crypto market as a whole has matured and become even more established. Obviously, selecting the correct coins is important.
Only Use Minimal Risk Exposure: A Smarter Way To Navigate Crypto Markets
Stacking up high-quality PoS projects is obviously the way to go, but it wouldn’t hurt to take a little risk. Perhaps even 5% of allocations can be funneled to some potential up-and-coming projects. This puts you in the game for some really stellar staking rewards later on down the line, if indeed any take off. Hive could even be a consideration here, as powering up HIVE is a form of staking when actively curating on the platform.
HIVE definitely has the potential to reach $5-$10 in the future, in my opinion. Obviously, due to network effects within an ever-growing ecosystem, the potential upside is effectively uncapped in many ways. This is definitely one of my personal choices. HIVE can be staked directly on the HIVE blockchain, ultimately unlocking additional revenue in the form of curation rewards.
Conclusion
This particular area of passive income generation still has great potential, especially if utilized and planned correctly. It is also important to remember that an increase in price ultimately increases your staking return. If you bought $ 2,000 worth of ATOM, which has an APR of approximately 10%, you would receive $200 in staking rewards each year. This is provided the price remains the same. If the price of ATOM surged by 5X, you would receive $1000 dollars each year in staking rewards.
This would be equivalent to earning 50% APR on your initial $ 2,000 investment. This is the beauty of staking coins! Over the long term, investors in quality projects should experience higher returns relative to their initial investment. The initial investment would obviously also grow during this time. Playing this game well can be very lucrative! Anyway, that’s me for this edition. See you soon!