Ethereum Staking Strategies for Long-Term Gains
Staking in the crypto-verse has become a popular concept in the past few years. The proof of stake protocol introduced the staking functionality, where crypto enthusiasts–called validators–monitor the blockchain, verifying and completing transaction blocks through validator nodes.
The validators use their funds to increase the blockchain's security while they get profits from the block rewards and gas fees on the network. Unlike the proof of work protocols, validators don't need to own high-tech equipment to run their nodes.
Since Ethereum moved its operations to a proof of stake protocol, the platform has achieved a more sustainable outlook and offered more users a chance for passive profits. Even though you need 32 ETH to start running a validator node, there are now several options for different classes of users to join the staking program without necessarily getting all that capital.
But that's not where we will be going for now. From experience, holding your staked tokens for long periods is the best way to earn substantial profits from Ethereum staking. That said, certain Ethereum staking strategies will help users get even more profits from their staking investment.
If you'll be staking on a network for a long time, you should understand the strategies for long-term gains and the possible risks involved. We've got something for you!
Why Long-term Ethereum Staking?
Long-term staking means investing a said amount of ETH in a particular staking option and waiting for an extended period, say one year, before withdrawing your rewards and assets. You might think it is a long time to accumulate profits, but the eventual rewards justify the wait.
The cryptocurrency market is extremely volatile, and tokens hardly maintain a position for elongated periods. In fact, very few token projects manage to keep their token prices in a specific constant range, and Ethereum is one of them.
Ethereum has constantly held its token price above $1,100 since its shift to the proof of stake protocol in September 2022. It currently trades at $1,529.89 after reaching a peak value of $2,120 in April 2023. Such consistency in a token's price is rare in the crypto-verse and makes Ethereum one of the best tokens to stake at the moment.
Now, the staking rewards are calculated using an Annual Percentage Yield (APY), which your staking platform agrees to pay you for running a validator node. The APY works like compound interest rates, as most staking protocols, like Lido, re-stake your assets for you daily.
With the daily staking principle, your staked rewards keep rising daily, increasing the longer you keep them staked. The compounding rewards system is why long-term staking is the best strategy to gain from your Ethereum staking experience.
Top Long-term Ethereum Staking Strategies in 2023
As we stated earlier, some strategies would ensure long-term gains in Ethereum staking, and understanding them will help you maximize the potential profits in the Ethereum network.
Mostly, the long-term Ethereum staking strategies are a mix of constant monitoring and proper research, and they might require you to keep close tabs on crypto news and updates. Keeping up with news will allow you to quickly spot opportunities, as well as issues, in Ethereum staking and position yourself for the best possible outcomes.
Enough small talk–here we go!
Check out your desired token and staking platform
The place of research in crypto trading can not be overstated, and you can barely read any investment piece that doesn't tell you to do your own research before delving into a project. Research helps you gather information on a token, its past performances, its current standings, and its potential, as much as the experts can predict.
In our case, Ethereum needs very little introduction. The project has been a flagship network in the crypto-verse and remains one of the best-performing tokens of all time. But Ethereum staking can hold on many platforms, centralized and decentralized, and these platforms are the ones you have to research before depositing your ETH tokens for staking.
You need to know what their APYs are and whether they adopt the daily re-staking principle we described for Lido. Also, you need to know how reliable they–and their smart contracts–are so you can determine the safety of your assets.
The most reliable platforms also have a wide range of Ethereum validators to choose from, indicating that their servers and validator nodes are not congested with stakers. From your research, you can decide on the staking protocol that offers the best deal in terms of APY rewards and security.
Diversify your staking investments
We already hinted to you about the volatility of the cryptocurrency market, and why you need to ensure that your preferred project for staking is a stable performer in the crypto-verse. Another staking strategy for long-term gains is to diversify your staking assets so you benefit from various tokens at once.
The principle here is simple.
Research other top-performing coins like Ethereum and understand their staking mechanisms before investing. When you are satisfied with their staking modalities, you can spread your assets to them. The result is to remain in profit even when Ethereum might be having a downtime. At such times, your staked assets will keep yielding overall profits even when one of them is not yielding optimally.
Timing your market entry
Many crypto users just jump on trending projects without watching out for potential flaws and opportunities. Some of what your research and expert advice will give you is insight into the best time to start staking a token.
Most tokens have periods when they are at their best during the year. Studying their historical charts and market analysis will reveal the best time to start staking. Usually, it's best to start staking when the APY is highest, especially when your analysis reveals that the token is most likely to spike for a considerable period.
Evaluate the staking costs.
Sometimes, staking protocols, especially in pooled staking, charge a flat rate from your staking rewards. In such cases, not all of your APY comes to you, so you have to check the terms and conditions properly to ensure that you factor in the costs when calculating your expected returns.
For some projects like Ethereum, there are huge slashing penalties for defaulting validators, and you must evaluate such penalties while considering your preferred staking platform.
Constantly follow news updates.
Many crypto stakers simply deposit their assets on staking platforms and come back for profits. However, these crypto projects drop rewards for certain tasks and incentives that the average scalper will miss.
Hence, you must follow crypto updates, especially those that concern your staked projects. From these updates, you will always be informed of the periodic 'goodies' from Ethereum and any other crypto token you are staking. You can also join the token community on various social media platforms so that you are up-to-date with the latest developments.
You should also have ready access to your staking dashboard, so you can get your asset balance and status at a glance. Remember, the crypto market is very dynamic, and you must be ready to make changes along with the market.
Long-term Staking Risks and How to Mitigate them
Staking a crypto token or project long-term could come with serious risks, and you must have ready measures to eliminate such risks or prevent them from affecting your staking investment.
The major risk that comes with depositing your staked assets with a third-party firm or validators is the slashing penalty. Since you're not the validator, you don't have a say in how the node is run, and your assets are in the care of a validator, which amplifies the risk of getting your assets slashed in cases of protocol breaches by the validator.
And that's why you should choose reputable companies to stake your assets with. If you're considering a pooled staking option, you should research the decentralized platforms available before settling for your choice.
If you would prefer a Staking as a Service (SaaS) firm, ChainLabo is one of the top choices around. You can have all your staking carried out by reputable validators and get 100% of your profits, all for a monthly fee.
Unlike centralized staking options, ChainLabo requires only your signing keys to access your node, and they will take up your staking from there. Your withdrawal key remains in your custody, ensuring that only you can withdraw or deposit in your staking account.
Other risks that could come up with other staking solutions include:
- Security issues, like smart contract errors, could arise in pooled and centralized staking methods. These issues could lead to total loss of assets in cases of cyber attack.
- Variable APYs due to the dynamic crypto market. This can't be avoided, and that's why you should only stake with high-performing coins like Ethereum.
- Lock-up periods. Some token projects have specific lock periods on their stakers, preventing the investors from withdrawing their assets in that period. You have to be aware of cases like this during your research before you start staking such coins.
There is no single strategy to mitigate most risks associated with long-term Ethereum staking. The most important thing is to check out the available staking protocols and understand all their risks and rewards before settling for anyone.
Staking as a Service (SaaS) firms are gaining popularity among Ethereum stakers, especially those who don't have the expertise to run a validator node. With ChainLabo, your assets are safe with validators you can trust.
All you need do is sign up for a plan and deposit your start-up capital to start your ETH staking.
Long-term strategies in Ethereum staking are the best ways to get the most out of your ETH staking experience. The longer you hold on to your ETH, the more staking rewards you get, and that's due to the daily compounding interest.
Since the tokens are re-staked daily, your profits come in the form of compound interest, which amounts to more profits than you expect in the long term.
Long-term staking offers you so much more than the regular scalping. Be sure to follow the Ethereum staking strategies outlined above for long-term gains.
Disclaimer: The information provided in this blog is for informational purposes only and should not be considered financial or investment advice. Readers should research and consult with a professional before making investment decisions.
Stay up to date!
Sign up for the latest ChainLabo news.