An alternative to traditional investments in times of uncertainty
Staking is attracting more and more investors without any experience in cryptocurrencies. Dmitrii Danilenko, CEO of aStake, offers his thoughts on why this is happening.
The uncertainty was caused by the pandemic. And, there is a high probability that a new economic crisis will hit the world. People are therefore forced to think outside the box to diversify their financial risks.
Traditional finance no longer shows such compelling returns. Moreover, in the face of a possible global crisis, a depreciation of national currencies could occur, while cryptocurrency gains momentum. As a result, even the most conservative investors might start seeing digital assets as a great alternative to what the traditional financial system has to offer. Staking can be a great entry point for these investors.
Here are a few reasons why new investors are ready to jump on board and invest.
Staking: FOMO Protection
We are all promised compelling returns, but entering a new market requires a deep understanding of every move you make. Whenever the price goes up, inexperienced people tend to buy, and when it goes down a bit – in panic, they sell everything they have. In staking, your assets are locked for a specific period of time. So basically you are protected against buying high and selling low.
Guaranteed tangible returns fixed in crypto are always the returns
In trading (whether spot, margin or otherwise), you can lose all your money if you didn’t make the correct prediction or if the price simply moved in the opposite direction. Staking seems much less risky.
Your guaranteed return will be paid no matter what. For example, if you stake 1,000 MetaHash (MHC) coins and the reward is estimated at 17%, you will receive 1,170 MHC in one year. And you will receive this amount in any case. Although the reward is paid in crypto, it is something more tangible than trading crypto without knowing what cryptocurrency is and what your outcome for the trade will be.
Staking: A sense of belonging
High yields aren’t the only driving force behind staking. By participating in staking, people feel they are advancing blockchain development. Users gather in communities around the product they believe in and in which they invest their money. Encouraged by the sense of belonging, these communities propel the growth of the product.
The history of crypto is full of instances where the power of the community made a sea change in the history of the project. The case of GameStop VS hedge funds is interesting. A handful of retail investors from the WallStreetbets Reddit community decided to battle the hedge fund Malvin Capital. The fund was gaining on the decline in GameStop’s share price.
Thanks to their efforts, GameStop jumped 92% on January 26, jumped 134% on January 27, and traded over 178 million shares. The WallStreetbets movement illustrated how the power of the crypto community works.
Another trend was triggered when the price of the Dogecoin meme token rose by 3,500%. Shortly after, a new coin named Shiba Inu appeared and claimed to be the main rival of Dogecoin. Within months, its price rose by 7,500% and turned a random investor into a billionaire.
Why is all this so important? What matters here is a sense of belonging. In particular, it feels like you have made your personal investment in the future of the project. It’s something that unites people and creates tangible value. In staking, where everyone makes this contribution, this meaning is particularly strong and evident.
Having money that makes money
Especially now, when things are uncertain, people are looking for non-traditional options to diversify their financial risks. By investing up to 10% each month, a user builds up a kind of capital over time that provides him with some stability in this unstable world.
For locking coins into the network, a user earns 4% to 17% depending on the blockchain. Today, this 17% can constitute an effective protection against inflation. Apart from the staking reward, you can also earn on the growth of the cryptocurrency price. For example, according to CryptoRank data, the MHC coin has gained +169.6% in price over the past year.
People with an investor mindset are looking for new options to earn passive income outside of the traditional financial system. After the fall of the US dollar index in 2020, investors started looking for different options in cryptocurrencies.
In a world where the government can print trillions of dollars at a time, you begin to realize that it is impossible to solve the problem using the same type of thinking that created it. So staking might seem like a good new option over traditional instruments.
At the beginning of February 2022, the total capitalization of the staking industry was $216 billion, according to estimates by crypto analysts. Indeed, staking is an investment tool that you can use yourself.
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About the Author
Dmitrii Danilenko is founder and CEO of aStake. During his career in the crypto industry, Dmitrii managed to raise more than $380 million in investments for different crypto projects in Asia, Africa, South America and the CIS.
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