Cardano staking can bring some serious long-term profits, but there are some serious risks
Staking on Cardano may not be the most popular option among cryptocurrency investors. However, it still outperforms traditional finance by a high margin as holding up to 100,000 ADA will give investors a 30% return over five years, data shows.
Cardano can be staked on various platforms and wallets, including one of the largest centralized exchanges in the world, Binance. Unfortunately, the interest rate on the coin is constantly changing. Some solutions adjust their APY in accordance with the supply locked in staking.
Typically, financial institutions offer higher staking rates if investors agree to lock in their coins for a certain period of time. With longer locking periods, exchanges pay more interest, and vice versa. The same rule applies to Cardano staking.
Downside of staking volatile assets
A stable income in a certain currency might be a good idea if an investor is trying to build a portfolio based on a stable income. However, staking assets like Cardano, Ethereum or anything else liable to elevated volatility brings a lot of risks.
Since most staking solutions with high interest require investors to lock in their funds for a fixed period, users have no other option but to face losses during periods of turmoil in the financial markets. Will happen.
Additional risks are tied to increased selling pressure after the locking period. For example, Ethereum investors are bracing themselves for a volatility and selling volume spike after a massive release of coins from the staking solution locked ahead of the Merge.
Fortunately, this will not be the case for Cardano, as betting on this network is not the most popular solution for investors.
