Investors generally trade cryptocurrency in the hopes that they will profit from the fluctuating value of the coin. Stablecoins, however, are typically used for the opposite reason. Users usually purchase stablecoins to avoid the volatile nature of other cryptocurrencies. However, there are still ways to profit from your stablecoin. In this article, we tell you everything you need to know about staking stablecoins.
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What is Stablecoin Staking?
Staking is a popular way to make more money from your crypto investment, but did you know that you can also stake stablecoins?
In case you’re new to cryptocurrency, staking involves pledging your cryptocurrency coins for a certain amount of time in the hopes that they will be chosen to validate a new block of transactions. In return, you will receive additional tokens, gaining as much as 15% in interest per year. This was typically a great way to make extra money on crypto holdings while waiting for the value of the coin to increase but is also a great way to earn more from holding stablecoins.
Stablecoin Staking Risks
Like staking any cryptocurrency, there are some inherent risks in staking stablecoins. The first type of risk is associated with the asset the coin is pegged to. Declines in the pegged asset’s value can affect the profits you’ll get from staking the coin, however, stablecoins are generally more resistant to shifts in value and are generally less risky than other cryptocurrencies. A second risk can come from the platform where you hold and stake your coins. There may be risks of a security breach, such as hacks, so prior research on the platform is highly recommended. You should pay close attention to the security measures of the platform and see if they are regularly audited.
Best Staking Stablecoins
When it comes to staking stablecoins, the coin you choose mostly comes down to personal preference. However, you should also consider the reliability of the asset it’s tagged to in order to avoid a significant loss of value. The most popular stable coins are usually ones that are staked to the US dollar. These coins include Tether (USDT), USD Coin (USDC), and BinanceUSD (BUSD). All three of these coins are heavily traded and audited. If you’re looking for something different, you can also buy stablecoins pegged to other fiat currencies such as eToro EUR (EURx) which is tied to the Euro on a 1:1 valuation basis.
Best Stablecoin Staking Platform
While choosing a stablecoin is a matter of personal preference, you may want to pay closer attention when choosing a platform to stake it on. You’ll need to make sure that the platform you’re choosing is secure and dependable. Since there are many platforms available, we’ve listed a few of our favourites here:
An all-in-one crypto exchange that also offers next-gen mobile banking, hi allows you to stake the Liquidity Provider tokens for Hi and BUSD/USDC while earning high APYs.
The world’s leading cryptocurrency exchange, with 2 billion average daily trading volumes and over 1.4 million transactions per second, Binance lets you stake BUSD, USDC, and USDT for a flexible lock-up period.
Another well-known and popular cryptocurrency exchange, Coinbase allows you to earn up to 5.75% APY by staking coins. You can even earn rewards simply for holding stablecoins such as Dai or USDC in your account.
Is staking stablecoins safe?
So long as you do your research on the platform you’re using, there should be minimal risks involved in staking stablecoins. You should also be aware that even though stablecoins are more resistant to fluctuations in value, it can still happen and you could end up losing money if the price of your staked coin drops. However, this is usually very rare for stablecoins and many people turn to staking stablecoins to minimize the risk of fluctuation they have with other cryptocurrencies.
Stablecoin staking APY
How much can you earn from staking stablecoins? The Annual Percentage Yield (APY) will vary depending on the platform and the coin you choose. Generally, by locking up your holdings, you could expect as much as 5-15% APY each year.