In this Article, We will discuss about What is staking, Details about staking providers, and Top 10 staking coins.
Cryptocurrency staking or baking is a visceral component of the cryptocurrency ecosystem. The success of many cryptocurrencies including Ethereum 2.0 will rely on the successful implementation of the PoS protocol (Proof of Stake).
While the top 10 cryptocurrencies (by the market capitalization) are currently dominated by PoW (Proof of Work) blockchains, almost all of the rest of crypto relies on stakeholders in one form or another. Moreover, in the future, with the implementation of PoS on Ethereum, the mining pools and competition between bakers (or stakeholders) will help in the growth of this attribute.
There are a number of exchanges and wallets that offer staking services. Moreover, there are also independent staking services both open-source or private, and custodial or non-custodial. On-chain, non-custodial staking pools are probably a better choice.
For instance, Cardano’s ADA staking is currently unavailable on popular wallets and exchanges. Nevertheless, it can be accessed on-chain or via direct staking services like staked.us.
If one chooses to stake directly via staking services, there are far more options and a higher percentage of returns. Of course, the risk due to unknown third parties increases in that process.
Among exchanges, Binance is leading the space with staking support to multiple cryptocurrencies. Apart from this, Coinbase which provides support for only Tezos, at the moment, is looking to expand this service as well. Coinbase Custody provides staking for two more cryptocurrencies Cosmos and Algorand. This is, however, unavailable to retail investors and limited to select countries. Coinbase staking is enabled only to limited countries, the list of which is given below,
- The Netherlands
- The UK
- The US*
*excluding New York and Hawaii residents
We can expect an extension of service across the platform soon. Apart from exchanges, hardware and open-source/centralized wallets also provide staking services. Among them, Ledger, Trust Wallet, Exodus, are some of the popular choices.
Furthermore, users must be careful while choosing who and where to stake their cryptocurrencies with, while some of them are recommended by the main-website of the cryptocurrency itself, open-source projects do not insure their guarantee.
Factors Affecting Staking Decisions
With the launch of sophisticated financial deviates, crypto-markets are now seeing far greater participation from institutions. The level of security and regulatory compliance has also improved across exchanges and blockchains itself. Staking is an integral part of the crypto ecosystem and investors looking to gain from it will analyse the following areas,
- the Annual Percentage Returns (APR) on staking
- the Inflation in the Cryptocurrency
- Market Capitalization
- Total and Circulation supply
- Price Analysis, and
- other factors
We have taken some of the popular, trusted exchanges and wallets and analyzed these factors of some of the top PoS tokens.
Annual Percentage Returns (APR)
The table given below lists the Annual Percentage Returns (APR) on staking of different cryptocurrencies on a few popular platforms. By far, Binance is one of the leading mainstream exchanges that allows staking of a number of cryptocurrencies.
Coinbase, the other leading platform, is adopting the staking feature more gradually than Binance. For retail users, only Tezos is allowed for staking on Coinbase for now. Cosmos [ATOM] and Algorand [ALGO] are available to Coinbase Custody customers which are institutional or accredited investors.
Due to the hype in DeFi, the current returns of staking on Synthetix network are tremendously high. Nevertheless, we can expect normalcy in the rates back soon. Cosmos and Algorand are leading the space with respect to returns at the moment. Cardano’s annual rate of returns is high as well. However, the staking of ADA is currently available through limited platforms. By Q4 2020, we can expect widespread adoption of ADA staking as well.
Tezos is by far the most popular cryptocurrency for staking that is listed across most multiple platforms. The returns on XTZ are somewhere around 5-6% annually. Tron is close behind Tezos with over 5% yield.
One other Token which is not listed here is EOS, it has a staking yield of 1.74% (at par with LISK).
The APR of these tokens should be equivalent to the inflation rate in the cryptocurrencies. However, the rate of inflation can also be affected by the sell-off or distribution of tokens by early investors or developers. Hence, the supply model of the cryptocurrency is a critical aspect of decision making for staking cryptocurrencies.
Market Capitalization and Supply
The market capitalization of the cryptocurrencies provides a sense of liquidity in the tokens. Furthermore, the total and circulating supply of the tokens gives an idea of the amount of pre-mine tokens, and future dilution.
The top two cryptocurrencies for staking by market capitalization are EOS and Cardano (ADA). However, the staking of ADA and EOS is less prevalent than Tezos, Tron and Cosmos.
Moreover, another primary issue for investigation before investing in PoS coins is analysing the supply schedule. These coins are pre-mined, and in some cases, the supply is capped while inflationary or deflationary in others. It depends on the design of the project. In the chart below, we compare the circulating supply (red) vs. the total pre-mine supply of the Tokens.
On a comparative scale, the immense supply of Tron and Vechain could be a worrying signal for the investors. Furthermore, Cardano’s ADA is not far behind. However, there are far fewer tokens to be added to the circulating supply of ADA than TRX and VET. Notice that while the supply of Algorand is limited, it has a higher discrepancy with the total supply. Tezos and Cosmos have equitable supplies on both scales.
Apart from the rate of returns on staking, investors will also look out for the price of the token itself. A rudimentary technical analysis of the tokens reveals the following. The pre-COVID crash levels have been taken as the point of reference.
Tezos (XTZ) is currently breaking above resistance on a USD scale, another weekly close above support at $2.88 looks bullish. Nevertheless, on the BTC scale, a close above the current parallel range will give confirmation. The resistance from the range is currently at 0.00036 BTC
The volume oscillators (CMF and KVo) are indicating bullish outcomes on the USD scale.
ATOM currently has a bullish set-up, however, still hasn’t broken above the resistance from the pre-COVID crash levels. On the USD scale, $5 and 0.00052 on BTC scale are essential for confirmation.
Ontology [ONT] represents a degenerate altcoin on the Bitcoin scale. The lack of volatility and consolidation at lows have continued for more than a year now. A break above $1.5 resistance or 0.0002 BTC is required for enforcing positive sentiments.
The technical outlook of TRX might be concerning for stakeholders. Unlike many other assets, the price of TRON token continues to trade below pre-COVID highs. Moreover, w..r.t. Bitcoin as well the resistance at 0.00000232 BTC is intact. On the positive side, the accumulation has held for a considerable time now, and bullishness can be expected. Nevertheless, due to the low market capitalization, a significant surge in volume with a positive break from resistance is required for long-term sustainability.
VeChain looks promising from a technical point of view due to successful break-outs above resistances. The token exhibits price discovery characteristics which could cause massive upswings with positive catalysts.
Algorand [ALGO] currently has a partially neutral outlook with a bullish inclination. The is in an uptrend with a series of higher highs and higher lows since the beginning of the month (July). Nevertheless, real bullishness is expected above resistance at $0.5. Until then, a retest on $0.23 is also on the cards, which could shake investors confidence in staking at current prices.
During the bull-run of 2017, NEO was dubbed as ‘Chinese Ethereum.’ The cryptocurrency has a stronger network effort than the newer projects and considerable distribution as well. However, the price continues to stay in bearish realms. The project has been no significant growth since 2019 and is ranging in the lows w.r.t. Bitcoin [BTC]. A break-out above $14.9 and 0.0031 BTC will reinforce bullish outlook in the token.
The descending trendline on EOS has maintained the bearish outlook on the cryptocurrency. The horizontal support is around $2 and the resistance, at the moment, is around the 50-period EMA (Exponential Moving Average) at $3.1.
On BTC scale, the outlook is primarily bearish. However, it can look to sweep the resistance around 0.0009 BTC.
Finally, the judgement of the risk and reward would also involve a fundamental analysis of the project and entrepreneurial plus market insight.
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