I have talked about my general view on the Bear Market and what to do in a previous post. And while that still holds true, I thought I would dig a little deeper into that topic of staking, as I think it is worth its own post.
What is staking?
Staking is when you put your tokens in a pile and they are used to create new tokens by validating transactions and allowing new blocks to be created on the blockchain. This is called Proof of Stake, or PoS. As a reward, you get "paid" new tokens of the same sort.
There is also another type of staking, where instead of more of the same tokens. You get paid a different type of token.
This is just a very very basic outlook at staking. And the purpose of this post is not to explain the inner workings of staking. It is just to give you the reader a very basic understanding of what Staking is. Or to refresh your memory if you forgot. =)
The amount you are rewarded or paid is told in APR or APY form. And if you want to know a little more about what they are and the difference I have the post for you:
In this, I explain what APR, APY, and ROI mean and how they work. I also get into some examples of how to calculate them. In short, it should cover all the bases.
APR is APR, right?
During a Bear Market, I have found that differentiating between the reward you get for staking is extremely useful. And the two types I am talking about are the one where you get more of the same token, and when you get a different token.
And let me tell you why I differentiate these two types of staking, especially during a Bear Market. As you should be aware during a Bear Market the prices tend to go down. And coins and tokens are usually worth the lowest they will be. The problem is not all the tokens drop the same amount and that means that the difference in price will greatly affect the APR when you farm a different token.
As an example, if the token I use to stake drops in price two times faster than the token I get as a reward. Then that means I constantly loo more and more of my return. Meaning I get less and less token in return. Despite the APR being constant throughout.
And sure, the opposite could also be true, where the reward tokens drop in price more than the staking token. And then you would be getting more tokens as a reward.
And at least for me, trying to research a lot of reward tokens to try and figure out how much they will drop in price and then compare that to the price drop in the staking token. It is just a lot of work.
This is why I instead propose you stake to get the same type of token as the reward. Why so, you ask? Well, this is because now the only thing you have to worry about is the APY or APR. This is because when you get more of the same token as a reward. The tokens all have the same price, so how much or how little the price fluctuate do not matter. You will always get the APY or APR % in new tokens.
When should I stake for other tokens? Well, my advice to you is to do this during a Bull Run. This allows you to take advantage of the staking tokens' higher price. Especially if you farm new tokens, as they tend to have a lower value at their start.
I hope that you have found this post to be informative or entertaining. One thing that it however is not is financial advice. So do with your money as you wish.
What are your thoughts on staking, and staking during a Bear Market in particular? Do you have a good staking platform you would like to share? Please do so in the comment section down below.
I have also just started a new series of weekly posts, that will go live every Friday. You can catch the eighth step here:
See you on the interwebs!
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