Economy

Staking as a Passive Trading Strategy: Unlocking Steady Crypto Earnings

Published

1 year ago

04/11/2024

Introduction

In the world of cryptocurrency, staking has emerged as one of the most popular and accessible ways for investors to earn passive income. Unlike traditional trading, where the value of assets can fluctuate wildly in a single day, staking provides a more stable and predictable form of income. Staking involves holding a specific cryptocurrency in a wallet to support the operations of a blockchain network. In return, participants earn rewards in the form of additional cryptocurrency. As the crypto market evolves, staking has gained traction as a low-effort, passive trading strategy, appealing to both new and seasoned investors.

In this article, we will delve into staking as a passive trading strategy, exploring how it works, its benefits and drawbacks, and the various considerations for investors. With the potential for steady earnings and portfolio diversification, staking offers a unique avenue for those looking to optimize their crypto holdings.

What is Staking?

H2: Understanding the Basics of Staking

Staking is the process of participating in a blockchain network by holding a certain amount of cryptocurrency to support network operations. Stakers contribute to securing the network, validating transactions, and in some cases, creating new blocks. In proof-of-stake (PoS) and delegated proof-of-stake (DPoS) systems, staking replaces the energy-intensive mining process seen in proof-of-work (PoW) blockchains like Bitcoin.

By staking their assets, users help maintain the stability of the network while earning rewards as compensation. The amount of cryptocurrency staked often determines the level of influence or participation in the network’s validation process.

H3: How Staking Rewards Are Calculated

The rewards for staking depend on several factors, including:

Amount Staked: The more you stake, the higher your potential rewards.
Network Inflation: Some blockchains inflate their supply to distribute staking rewards.
Duration of Stake: Certain networks offer higher rewards for longer staking periods.
Overall Network Staking Ratio: If a large portion of the network’s currency is staked, individual rewards may be lower.

Benefits of Staking as a Passive Trading Strategy

H2: Advantages of Staking

Staking provides a variety of benefits for investors looking to earn passive income. Here are some of the primary advantages:

Consistent Passive Income: Unlike volatile trading, staking provides a steady source of income, with rewards paid periodically.
Eco-Friendly: Staking is energy-efficient compared to mining in PoW systems, which require extensive energy usage.
Support for Blockchain Networks: By staking, investors play a role in securing the network, thereby contributing to the stability and decentralization of the blockchain ecosystem.
Low Entry Barrier: Staking does not require advanced technical knowledge or expensive equipment, making it accessible to most crypto holders.

H3: Portfolio Diversification

Staking allows investors to diversify their portfolio by adding different staking assets, spreading risk across various projects. This approach can reduce volatility and create a more balanced investment strategy.

Risks and Challenges of Staking

H2: Drawbacks of Staking

While staking has numerous benefits, it is not without its challenges. Below are some of the key risks associated with staking:

Market Volatility: Although staking rewards may seem stable, the underlying asset’s value can fluctuate, impacting the actual return on investment.

Lock-Up Periods: Some blockchains require stakers to lock up their assets for a set period, during which they cannot access or trade their funds.

Slashing Penalties: Certain networks impose penalties, known as slashing, for validator misbehavior. Stakers may lose a portion of their staked assets if the validator fails to comply with network rules.

Inflationary Pressures: Some networks distribute staking rewards by inflating their supply, which could dilute the value of the token over time.

H3: Lack of Liquidity

Staked assets may lack liquidity, especially during lock-up periods. If the market takes a downturn, stakers might be unable to sell their holdings quickly, resulting in potential losses.

Different Staking Methods

H2: Popular Staking Methods for Investors

There are various ways to participate in staking, each with its pros and cons. Below are a few popular methods:

Direct Staking: Investors stake their assets directly on a blockchain network by becoming validators.
Delegated Staking: Investors delegate their tokens to a validator node. The validator takes care of technical requirements while the investor receives a portion of the rewards.
Staking Pools: Staking pools allow users to combine their resources to maximize rewards. Pooling can help smaller investors earn rewards even if they don’t meet the minimum staking requirements.

Key Considerations for Staking

H2: Factors to Evaluate Before Staking

Before diving into staking, investors should carefully consider the following:

Staking Yields: Evaluate the reward rate offered and compare it with potential inflation on the network.
Staking Period: Be mindful of the lock-up period and whether the network offers flexible options for early withdrawal.
Reputation of Validators: When choosing a validator, consider their reputation, fee structure, and history of slashing events.
Platform Security: Ensure that the platform or wallet used for staking has strong security measures to prevent unauthorized access.

H3: Tools and Resources for Effective Staking

Platforms like Nearest Edge offer tools and insights to optimize staking strategies, providing traders with the necessary data to make informed staking decisions.

Staking Case Studies

Many investors have found success through staking, particularly during market upswings. For example, Ethereum 2.0 staking has attracted significant interest as it prepares to transition from PoW to PoS, offering attractive returns for ETH holders who choose to stake.

Another example is Cardano (ADA), which has gained popularity due to its unique approach to staking and user-friendly wallet options. Both Ethereum and Cardano highlight the advantages of staking for long-term investors focused on capital appreciation and passive income.

FAQ Section

H2: Frequently Asked Questions (FAQ) on Staking

H3: 1. What is staking in crypto? Staking is the process of holding crypto in a wallet to support a blockchain network and earn rewards.

H3: 2. How much can I earn through staking? Earnings vary based on factors like the amount staked, duration, and network inflation. Yields generally range between 4% and 20% annually.

H3: 3. Are there risks involved in staking? Yes, risks include market volatility, slashing penalties, lock-up periods, and liquidity constraints.

H3: 4. Do I need technical knowledge to stake? No, many staking platforms make it easy for beginners. Delegated staking and staking pools are especially user-friendly.

H3: 5. Is staking the same as mining? No, staking is a different consensus mechanism. Mining requires significant energy use, while staking does not.

H3: 6. What is a lock-up period? Some networks require staked funds to be locked for a specified time, limiting access during this period.

H3: 7. Can I stake multiple cryptocurrencies? Yes, depending on the network and platform, you can stake various cryptocurrencies simultaneously.

H3: 8. What are staking rewards based on? Rewards depend on the network’s design, including the staked amount, duration, and market conditions.

H3: 9. Are staking rewards taxed? Yes, staking rewards may be subject to taxation. Consult with a tax professional for guidance.

H3: 10. What are the best tools for staking? Platforms like Nearest Edge offer tools to track staking returns and monitor market trends.

Conclusion

Staking is a highly effective passive income strategy in the crypto space, offering a consistent way to earn returns without constant monitoring. With several options, including direct staking, delegated staking, and staking pools, investors can choose a method that fits their risk tolerance and financial goals. However, it’s crucial to understand the potential risks involved, such as market volatility, liquidity issues, and slashing penalties.

As the DeFi ecosystem expands, staking will likely continue to grow in popularity, providing both novice and experienced traders with a valuable income-generating tool. Whether you’re seeking a low-maintenance strategy to grow your crypto portfolio or an eco-friendly alternative to mining, staking presents a compelling option in the crypto market.

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Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via [email protected]

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Economy

Nigerian Stocks Close 1.13% Higher to Remain in Bulls’ Territory

Published

7 hours ago

20/12/2025

Dipo Olowookere

By Dipo Olowookere

The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.

Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.

Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.

But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.

Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.

As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.

A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.

Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.

Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.

Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.

Economy

FrieslandCampina, Two Others Erase N26bn from NASD OTC Bourse

Published

9 hours ago

20/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.

The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.

FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.

On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.

During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.

Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.

The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.

Economy

Naira Crashes to N1,464/$1 at Official Market, N1,485/$1 at Black Market

Published

12 hours ago

20/12/2025

Adedapo Adesanya

By Adedapo Adesanya

It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.

In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.

In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.

In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.

The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.

President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.

The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.

President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.

Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.

Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.