The adoption of cryptocurrencies and blockchain platforms is expanding rapidly. When the first crypto – Bitcoin – emerged, the word “cryptocurrency” was clear to a few people with narrow specialization. Today, blockchain platforms enter the real sector of the economy, helping to facilitate and ease currency transfers and conversion all around the world, connecting businesses and financial institutions with smart contracts, and allowing people to use digital assets as payment methods. However, it is still far from the everyday use of crypto coins. They have received a much wider application scope in investments and trading. Since the cryptocurrency market is incredibly volatile, it opens enormous earning options for traders and investors. So they buy a cryptocurrency and then resell it when it changes, making a profit.
Trading has many options and forms. Essentially, it involves buying cryptocurrency
and generating income from its price fluctuations. It can be done in a couple of minutes (scalping); in 24 hours (intraday trading), and in a couple of weeks (swing trading). Trading means that you should always keep abreast of the market changes and watch the charts. Also, it means you should understand the factors that may affect the price. For this purpose, the following types of analysis are made:
- Technical research. it is all about analyzing the technical characteristics of crypto coins and their price charts. Crypto graphs give enough information on the asset for those who can read them correctly. They indicate different candlesticks that help to find historical indicators and patterns that become the basis for price prediction. After all, looking at the way the asset behaved in the past, it is possible to forecast how it will act in the future.
- Fundamental analysis. This research is connected with a wider scope of information, including the factors that affect the cryptocurrency market on a global scale. That may be some decisions, laws, and news that can make crypto charts move.
- Quantitative analysis includes the results of technical and fundamental research, wrapped in formulas for the calculation of important indicators.
Crypto trading requires that a trader is always aware of the current situation and the news background and able to react quickly and correctly. Trading may seem somewhat difficult for beginner crypto owners without experience working in this field. That is the reason why they first pick long-term investments.
Investment is a less stressful option of buying cryptocurrency and making money from it. You may hold coins for many months, and that’s enough time to think and come up with the correct decision. Important to mention that investment can also be stressful, for people are subject to the feeling of greed and frustration. So, an inexperienced investor can emotionally decide to withdraw funds immediately, forget his long-term strategy, and lose income. Successful investments require patience, a cool head, and knowledge of the market trend.
There is another way to earn crypto in a less stressful way – cryptocurrency staking. Let’s get crypto staking explained.
What Is Crypto Staking?
If you have tried some large cryptocurrency platforms, you have probably seen the proposition to stake crypto on them. Crypto staking is a way to earn coins by holding them on the network. We can draw an analogy with a bank’s deposit – you entrust your cash to the bank, which pays you interest in return. At the same time, banks use your money (credits, etc.). There are conditions upon which you can withdraw funds back and end the deposit contract.
Unlike banks, blockchain does not use your funds for its needs as long as it is not a crypto lending option, which is also available on some crypto platforms.
How to stake crypto? There are several ways to do that:
- Take part in the Proof-of-Stake work. The process allows getting more tokens for locking the tokens you have on their network. In such a way, you make a contribution to the network and increase its liquidity, and in return, the network rewards you with additional coins. Also, when you put your assets in the network, you become a participant in transactions on it and help validate them. Platforms such as Solana, Polkadot, and Ethereum work on the PoS mechanism, so you can stake their tokens on their networks.
- Staking in the pools of liquidity. There are platforms specialized in staking pools. They gather people who want to unite and contribute to the network with a larger number of tokens and, thus, receive bigger rewards. Such people are called liquidity providers for putting their tokens on the platform; they increase its liquidity and receive rewards of transaction fees in return. The size of rewards depends on the platform you use. What are the pools of liquidity? – They exist in decentralized platforms and are formed from users’ funds that are staked and blocked in smart contracts. The pools are full of funds, which adds liquidity to them and enables speedy transactions. Such platforms users can buy and sell crypto even if there are no buyers and sellers for them – the liquidity pool provides it through automated market making. That is the main difference between such platforms and traditional markets, where sellers must wait until someone wants to buy the same asset.
Benefits of Staking Crypto
Let’s see the benefits of staking:
- Many investors that have held crypto for years think about the point of doing so – tokens just stay in their wallets idle and do not work for them. At the same time, it is possible to allocate some coins and lock them in a staking pool, thus, adding more coins to your portfolio. That’s a good idea of how to increase income while actually doing simple actions of holding coins and not selling them.
- If you want to support some blockchain (suppose you believe in this project and want to contribute to its growth), you may lock your coins on its network and, thus, add liquidity to it, which will help make the network faster and stronger). At the same time, the network will thank you with additional coins. Many people are fond of blockchain games, which offer their players NFT tokens and other assets as rewards for staking. Besides, in some play-to-earn games, players receive the right to vote for the game changes and development in return for staking their tokens. That is the way to govern the whole platform.
- When many people hold their tokens in staking, it helps to increase the asset’s value. Thus, by staking, you help the asset grow.
Risks of Crypto Staking
Along with the numerous benefits cryptocurrency staking brings, there are also risks:
- We should not forget that the crypto industry is still very young and incredibly volatile. When you pick the duration of coins locking, keep in mind that not all crypto platforms allow you to take tokens out before the term expires. So if you lock tokens for an extended period, of course, you will get more rewards, but at the same time, if the token’s price drops, your losses may exceed the bonuses you could get. So it is advisable to pick the most popular crypto asset with high market capitalization and liquidity, which are not very sensitive to market volatility. Also, start staking with the shortest possible duration.
- Like for any operations with crypto assets, platforms charge fees. Make sure the size of the commissions suits you.
It is done with disadvantages, for staking has more benefits than drawbacks. Let’s see how to start staking for a beginner on the example of the WhiteBIT platform.
Staking on WhiteBIT
Picking a platform for cryptocurrency staking is less important than picking an asset for staking. Crypto platforms offer different conditions for this passive income tool, varying by the fees, rewards, supported tokens, and length of locking. So read those conditional attentively. You should not entrust your coins to little-known exchanges that offer incredibly attractive tips while supporting low-cap coins; otherwise, you risk getting into a trap and losing funds. Better to choose a large and well-known exchange with official registration that can offer sufficient liquidity for staking the most promising coins such as SOL, DOT, ETH, and others.
Read the reviews of the platform and find out if it has a community and social networks where its users communicate and share experiences.
We recommend using the WhiteBIT exchange – a young yet reputable company focused on operations with crypto assets and working in over 150 states. The WhiteBIT exchange offers the WhiteBIT Earn section, where you can pick among these two passionate earning options: crypto lending and staking.
Crypto lending is putting your assets in the platform with up to 30% earnings. The platform may use those funds as loans to other users. Lending is also called smart staking, divided into around 40 plans to pick from. They differentiate by the underlying asset and the duration of the staking contract. That may even be a yearly plan, meaning you lock your coins for the year and receive maximum rewards in return.
To participate in crypto lending on WhiteBIT, you need to register and add coins to your main account. Then pick the staking program and lock your assets in it. You may withdraw tokens before the plan expires, but in that case, rewards will not be accrued to your account.
The staking option is under development in WhiteBIT. It implies that you will be able to put your tokens in staking, and they will participate in different functions, and in return, you will get a fixed reward or interest. Locking tokens in staking allows your funds to be a part of the PoS operations.
Read more about staking and crypto lending benefits on the WhiteBIT blog.
