Tactics for Newbies: Simply Staking
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Tactics for Newbies: Simply Staking

By rah | rah | 20 Jul 2020


Potentially the easiest way of making money when in investing in Crypto is to invest in a Crypto that promises rewards for you holding. The most notable crypto-currency that offers such a reward is TEZOs and it provides a form of easy and passive income. Just sit back and watch the money come in. Coinbase offer staking services for TEZOs with a return of 4.9%, although this is variable. My TEZOs are currently offering a return of 4.03%

This is not quite what it said on the tin, but it is far better than my TAX-free savings account is currently offering me. Let’s look at some sample figures using an arbitrary figure.

Calculation:

staking_vs_banking

Compound interest figure verified here

So if it is that easy why isn’t everybody doing it?

It seems to be so simple, but it is not so straightforward. There are two related issues. The main issue is that TEZOs fluctuate quite a lot and this is great when they are up, but drastic when they are down. Again let me illustrate. In the few weeks I have been trading I have seen TEZOs drop to £1.78 and rise to £2.42 so let’s imagine we have bought TEZOs at £2.20 (the exact midpoint) and see what happens.

staking_risk

The above table is for illustrative purposes only. The figures assume a change to the TEZOs price on Day One, immediately after the purchase and then for the price to hold for the whole year. This is actually totally unrealistic as the TEZOs prices constantly fluctuate.

The point of the table is to show that even with interest, if there is a drop in the value of TEZOs, losses can still be sustained. In this case it is better taking the £0.10 from the bank account!

The second issue is that interest is received as further TEZOs. This isn’t necessarily a problem because it still adds to portfolio value. Just don’t expect cash payouts to your wallet. The TEZOs quantity remains constant (variable based on how much you are holding)

As a crypto-currency TEZOs is a curiosity.

Reading around the subject shows that it is innovative and cutting edge, but at the same time unlike many cryptos it lacks real world application. This is probably the central question – simply what’s the point? This will discourage investment and inevitably reduce its value.  It was widely touted as being a USD5.00 (or approximately GBP4.00) currency so while buying for less than that there is a sense that it will prove to be good value in the end.

So to summarise:

Advantages

  • Its long term future is promising with it currently being available at about 70% of its projected long term price.
  • It’s not static and its value can increase.
  • If you use Coinbase they will stake for you so it creates a form of passive income.

Disadvantages

  • Wild fluctuations can see you investment shrink. Even with staking interest this may not cover losses.
  • Lack of real world application raises questions over the long term sustainability of it as a currency. If it goes down you will lose everything.
  • To really benefit from staking you have to hold for a sustained period. These funds locked into your TEZOs wallet could leverage better results from other crypto investments. Just as an example Chainlink had a crazy run a couple of weeks ago. I bought at £4.64 and sold at £6.00. It actually went up as high as £6.87 but I bailed before that. I held for three days, if only I had held for six... (but better this than wait and lose) Even so based on again an arbitrary investment of £1000 the follow results would have been achieved even when paying Coinbase fees. As you can see they are far higher than the results that staking would have produced. Of course the great variable and Holy Grail for all of us is to find such a jump. We all dream of another BitCoin explosion – just on the currency we have invested in.

chainlink_tezos

Conclusion

TEZOs overall are a good investment, but don’t be seduced by staking. It’s not so straightforward. Buy well, buy low and if you want staking rewards be prepared to lock in your investment for a long time. TEZOs are valuable, but should be considered very much to be part of a blended strategy, which I will write more about soon.


rah
rah

I love reading and technology as well as history. I teach English and Business to professional clients as well as soft skills with a focus on communications. I am a big fan of both Sheffield Wednesday and Lincoln City Football clubs


rah
rah

Experienced Business Owner and Coach and Tutor who now trades in Crypto. It is proving to be an interesting journey with so much technical language involved. Follow me as I learn the trade (and how to trade). Made some howling mistakes to begin with, but still learning and will share what I learn as I learn it for the benefit of the community. - RAH

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