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Here’s the Surprising Amount of Passive Income You Can Make Staking Cardano

June 4, 2022
in Cardano
0

Making money with Cardano (ADA 2.24%) hasn’t been in the cards for many investors so far in 2022. The popular cryptocurrency is down close to 60% year to date.

However, some investors have been able to cushion their losses with the digital token. They’ve been able to do so by staking their coins. Here’s the surprising amount of passive income you can make staking Cardano.

Image source: Getty Images.

Stake and rake

The process to generate passive income with Cardano is straightforward. You simply stake your coins. Then you rake in the rewards from doing so. And those rewards can be quite appealing.

Several cryptocurrency exchanges support staking Cardano tokens. The best annual yield that I’ve found was on Binance. This popular crypto exchange offers an estimated annual percentage yield (APY) of 11.23%. To get this APY, you’ll have to stake your coins for 90 days.

What if you don’t want to lock up your Cardano tokens for that long? No problem. Binance also has shorter staking periods. For example, the exchange offers an APY of 8.24% if you stake Cardano for 60 days. The yield isn’t too much lower — 7.75% — for staking 30 days. 

You can earn lower rates with other crypto exchanges. For example, Nexo states that investors can make up to 8% annually staking Cardano. Kraken offers annual yields of between 4% and 6%. 

Risks

Pretty much everything comes with some level of risk. Staking Cardano is no exception.

The main downside to staking your Cardano tokens is that most crypto exchanges will require to you lock up your coins for a specified period. During that time, you won’t be able to sell the tokens.

And the amount of time that you’re restricted from selling can be longer than you might think. Some exchanges can take a few days to “unstake” your coins, effectively extending the lockup period.

There’s an obvious potential problem with this limitation. You could easily lose more than you make in staking yields if Cardano’s price plunges. As a case in point, the cryptocurrency’s decline in recent weeks far exceeded the highest amount you could’ve made over the entire year from staking your Cardano tokens.

You don’t necessarily have to lock up your tokens, though. Binance and some other exchanges offer flexible staking for the cryptocurrency with no lockup period. However, you’ll have a major trade-off to make with this approach with a much lower yield. Binance, for example, only offers an estimated APY of 1% with its no-lockup option.

An attractive alternative — for some

Because of these risks, many investors will be better off not staking Cardano. By the same token (no pun intended), risk-averse investors will also want to avoid buying Cardano and most cryptocurrencies altogether.

But there are some investors who aren’t afraid to take on the risks associated with investing in cryptocurrency. If you think that Cardano is destined to increase in value over the long term (or even merely hold its own), staking could be an attractive alternative to generate passive income.

There are reasons to be optimistic about Cardano’s long-term prospects. Some especially bullish investors even think that it could become bigger than Ethereum thanks to its impressive scalability and an increasing number of real-world use cases. Investors with a buy-and-hold mindset for Cardano have an opportunity to boost total returns by staking the token. 



This news is republished from another source.

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