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Cryptocurrency Staking, Another Passive Income

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Sajjad Hussain
Photo by Tech Daily on Unsplash

In order to understand cryptocurrency Staking, you need to understand Proof of Stake (PoS), compared to the Bitcoin PoW mining mechanism which is an energy-intensive operation, a new BTC coin is generated through the process of solving a mathematical puzzle, PoS requires significantly less energy, in this mechanism the correctness of transaction is determined by the stakeholders of particular blockchain who lockup certain amount in order to verify the transaction and earn a certain reward.

By locking up the cryptocurrency and participate in activities like voting and verification for the blocks of PoS tokens, users earn rewards that are the same as the traditional Bitcoin mining process but compare to Bitcoin mining reward which is fundamentally inflation of the token, the rate of return in staking method based on the factors of the inflation rate, mortgage rate, and price changes. It is a new type of business model in which stakeholders generate income through pledging the crypto assets, participate in voting and delegation and the rate of return is depending on the type of coin and the exchange you are using.

Bitcoin, the big pie in cryptocurrencies has been almost 10 years old, stable and secure due to POW consensus, but this method recently criticized by the outside world due to a large number of hash operations, the energy consumption is exceeded against many developed countries, instead, PoS consensus solved the extreme energy consumption, the new arrivals of PoS projects in blockchain world are not only just using PoS consensus but they are trying to improve this method, the blockchain like Cosmos, Polkadot, Algorand and Ethereum 2.0. adopted the PoS consensus.

The current global market value of encrypted assets is 250 billion U.S. dollars and continuously increasing, the arrival of new PoS projects fuels encrypted assets market value therefore many crypto capital institutions, crypto exchanges, and crypto mining pools introduced many staking products to users. Among all of the staking products the users are most familiar with the exchange-based staking method, there are many PoS service providers offering higher yields but for users perspective security of crypto assets are more important for example Coinbase guarantees its customers that all of their tokens will be stored on cold storage (offline wallets)

The advantages for exchange-based are following

  1. Custody of wallets always in user’s hands
  2. Crypto assets always available for online trading
  3. Wider wealth management methods
  4. You can get the high APY for certain coins

Crypto exchanges around the globe offer easy steps to get involved in staking, convenient to participate and eliminate the cumbersome procedures, users will obtain substantial mining income through pledging of an asset.

The disadvantages of exchange-based methods are following

  1. The user’s assets vulnerable to exploits and hacks
  2. The restriction of certain thresholds for participation
  3. Time limit on the release of the pledged asset.
  4. The high learning curve.

https://www.bitcoinsuisse.com/fundamentals/what-is-staking

Source: https://medium.com/cryptocurrencies-ups-and-down/cryptocurrency-staking-another-passive-income-a3a22374fae2?source=rss——-8—————–cryptocurrency

Blockchain

Jim Cramer Urges for Caution in The Cryptocurrency Market Amid Evergrande Saga

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CNBC’s Jim Cramer opined that the Evergrande debt crisis in China could keep causing severe disruption in financial fields, including the cryptocurrency market. He also advised people sitting on unrealized gains from their investments to take “something off the table” before losing it.

‘Don’t Let It Become a Loss’

The American TV personality Jim Cramer shared his stance on the recent crypto decline and the ongoing crisis with one of China’s leading real estate companies – Evergrande. He believes the firm’s issues are likely to keep harming the digital asset market in the near future. Consequently, he urged fellow crypto investors (like himself) to take some profits while it is time:

“If you own crypto in any form and you’ve got big gains, I recommend taking something off the table. I know the crypto-lovers never want to hear me say sell, but if you’ve got a big gain as I did, well, I’m begging you: Don’t let it become a loss.”

Still, CNBC’s Mad Money recommended leaving some holdings in case China “changes its attitude towards the Evergrande bailout.”

According to Cramer, another reason why cryptocurrencies are a risky investment instrument at the moment is their relation to Tether. His concerns are that many investors purchase Bitcoin and Ether via the most widely-utilized stablecoin, which has exposure to Chinese commercial paper. Being a multibillion-dollar company, Tether’s collapse could have a vicious impact on the entire digital asset market.

“If Tether collapsed, well, then it’s going to gut the whole crypto ecosystem.”

It’s worth noting, though, that Tether recently denied assumptions that it holds any commercial paper or securities related to Evergrande.


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Jim Cramer
Jim Cramer, Source: CNBC

Should Investors Follow The Advice?

It is worth noting that Cramer’s cryptocurrency actions have been highly inconsistent, as time has shown. Back in 2018, when bitcoin dipped beneath $4,000, he criticized the asset calling it an “outlaw currency.” However, when BTC reached an all-time high of nearly $65,000 three years later, the American said he had invested in the asset and vowed to receive his salary in it.

CNBC also doesn’t have the best record at providing cryptocurrency predictions. At the end of 2020, Brian Kelly – another TV personality of the media – warned that bitcoin’s price could experience a short-term correction by dropping to $12,000. Instead, its USD value continued its rally as BTC traded at nearly $30,000 by the year’s end.

Another example is CNBC’s report about Ripple in 2018. The media advised investors to get involved with XRP, praising it as “one of the hottest new cryptocurrencies, and it only costs a bit over $2 per coin.” What followed, however, was a quick and painful slump. A month later, XRP dropped by 82% to $0,57, and in August, it went further down to $0,23.

Featured Image Courtesy of BusinessInsider

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Source: https://cryptopotato.com/jim-cramer-urges-for-caution-in-the-cryptocurrency-market-amid-evergrande-saga/

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Blockchain

SEC Chair Gensler: Stablecoins Are Poker Chips at the Casino Gaming Tables

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David Ignatius of the Washington Post interviewed SEC chair, Gary Gensler, on the cryptocurrency landscape, where the latter provided his approach to regulating the digital asset industry.

Gensler expresses optimism for the possibilities crypto provides for enhancing finance, but he also believes that most of the space should fall under regulatory supervision – including stablecoins.

  • At the start of the interview, Gensler commented on the recent market crash in the market of “crypto tokens” (the term some of his colleagues prefer, rather than ‘cryptocurrency’), calling it a “highly speculative asset class.”
  • Though he believes there are innovations in the basic whitepaper Satoshi Nakamoto proposed a dozen years ago, he also said there is “often nothing standing behind [crypto] other than what someone else will pay you for it.”
  • “I don’t think technologies last long outside of a social and public policy framework,” noted the chairman.

  • Later in the conversation, when discussing which tokens fall under the SEC’s jurisdiction, Gensler argued that “most of these tokens are securities.” At the same time, only “some” are commodities, and some have attributes of both.
  • He then pivoted to stablecoins, saying they “may have attributes of investment contracts,” while some “have attributes like banking products…”
  • Gensler also added that the SEC is working under the guidance of secretary Janet Yellen to produce a report on stablecoins. Yellen is well known for her opposition to cryptocurrency on the grounds that they facilitate criminal activity.
  • Towards the end of the interview, Gensler said he is regulating the cryptocurrency space in advance of an inevitable “spill in aisle three.” Knowing that there is no room for 5 or 6 thousand different forms of money, he is putting an investor protection regime in place before most of them fall off.
  • “We’ve got a lot of Casinos here in the wild west,” he commented, “ and the poker chips are these stablecoins.”
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Source: https://cryptopotato.com/sec-chair-gensler-stablecoins-are-poker-chips-at-the-casino-gaming-tables/

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Blockchain

SEC Could Approve a Bitcoin Futures ETF by October, Says Bloomberg Strategist

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The US Securities and Exchange Commission could greenlight a Bitcoin futures ETF as early as October this year, said Bloomberg’s Senior Commodity Strategist – Mike McGlone.

He also doubled down on his $100,000 price prediction for BTC by the end of the year, adding that the cryptocurrency is on its way to replace gold, similarly to how the car outplaced the horse as the most utilized transportation tool.

Bitcoin Futures ETF Coming Soon?

The topic of whether the US securities regulator will approve a Bitcoin ETF has been going on for years, with the watchdog refusing to greenlight even one of the countless applications. At the same time, Canada, among other nations, already has such products live.

Consequently, the northern neighbor of the US has attracted investors, such as Cathie Wood’s ARK Invest, who want exposure to a BTC ETF, said McGlone in a recent interview. This will push the SEC to finally approve an exchange-traded fund tracking the performance of bitcoin, even if it is a futures one.

In fact, he predicted that such a “baby step” development could be right around the corner – by the end of October.


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Thus, Bloomberg’s strategist added this potential approval to his list of reasons why he believes BTC could skyrocket to $100,000 by the end of the year.

Earlier in September, Fidelity Investments – a company that has filed a few applications with the SEC to have its own BTC ETF – urged the regulator to approve such a product, which could boost the asset’s legitimacy among certain investors.

Bitcoin Vs. Gold

Another debate widely discussed within and outside of the cryptocurrency industry sees the duel between gold – regarded as the best store of value asset for centuries, and bitcoin – perceived by some as the (better) digital version of the metal.

McGlone joined the BTC camp, indicating that Bloomberg’s research department has observed a substantial outflow of gold-related funds into such with exposure to bitcoin or directly into the cryptocurrency.

Thus, the analyst advised investors who already have exposure to bonds and gold to take even a small portion of their allocation and put it into bitcoin. Otherwise, they risk being “left out” of significant gains, which are more likely to occur for BTC.

He outlined one major difference between the two assets that will benefit bitcoin – the cryptocurrency works digitally, while gold doesn’t. In a world rapidly migrating to the online space, this is the critical feature that will eventually help BTC to succeed.

“I fear that people that keep pointing out how gold has been a hedge forever – I agree with you. But, I will leave you with this – before the automobile, the horse was the best form of transformation. Every day that bitcoin doesn’t fail, it is moving into gold’s space.”

Ray Dalio is Wrong

McGlone also touched upon the topic of regulations, which has been a hot one lately. Ray Dalio, the billionaire hedge fund legend, noted earlier this month that if bitcoin is to become a success, US watchdogs will step up and stop it. He believes they can do so because they have all the necessary tools.

However, Bloomberg’s strategist disagreed with Dalio. Just the opposite, he classified such a development as “almost impossible.”

“I have gone through those iterations numerous times. And, how do you stop bitcoin unless you change the laws of this country? The only way I see that really stops bitcoin is to ban the internet.”

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Source: https://cryptopotato.com/sec-could-approve-a-bitcoin-futures-etf-by-october-says-bloomberg-strategist/

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