Apr 18
Crypto stablecoin staking — Rates comparison
Staking crypto allow us to earn interest simply by depositing our coins into an exchange or protocol and holding for a period of time.
Staking a cryptocurrency does not mean that we will end up making a profit. It depends on the volatility of the underlaying coin. For instance, if we get 10% yearly interest for staking BTC, after 1 year we will make money only if the price of BTC has not gone down by more than 10%.
To eliminate the volatility risk on the market prices we can stake stablecoins. Stablecoins are pegged to a fiat currency and do not change in value. Therefore, staking a stablecoin like USDC should eliminate all volatility risk while still earning interest through staking.
However, it is also likely that the exchange or DEFI where you stake your coins goes bankruptcy. For that reason, I would recommend you to only stake a very small amount of your money given the inherent risk. Remember that crypto is not regulated. In the recent market crash, we have seen a lot of people losing a lot of money after investing in stable coins such as UST which lost the PEG last month.
In this post, I would like to focus on stablecoin staking and where to get the best staking rates.
Earning interest holding stablecoins
We may have the option to earn interest trhough staking crypto in a CEX or a DEX.
In this post, I will compare the rates offered by staking stablecoins in different Centralized Cryptocurrency Exchanges (CEX). Selecting the best CEX provider is key to maximize returns. As you will find out below, staking rates vary across providers.
There are multiple options on where to stake and how to structure our strategy. To keep it short, I would simply provide an overview of two scenarios using the top stablecoins in five of the most popular CEXs:
- First scenario will compare stake rates of stablecoins without locking the coins and holding native coins.
2. The second scenario will show the staking rates when we do lock the coins for a period of time and we do hold CEX native coins to maximize the rewards.
1. Stablecoin rates without locking and with no native coins
The summary of this approach is captured under below table. Using this strategy, we just need to deposit funds in one of the listed CEX and will be able to start earning the promised rate without having to lock our coins or buying the CEX native coin. Then, we only need to wait and pray that the CEX where we store our coins is still alive when we want to retire our funds.
As shown below, depending on the stable coin, we obtain different rates. For instance, Binance offers the best rate for USDT and BUSD.
This strategy may be the easiest to follow but at the expense of not maximizing our staking returns.
2. Maximising Stablecoin interest rates
Our second and last scenario is where we follow a staking strategy to maximise earnings. This scenario would be suitable for us if we are ok to fulfil below requirements:
- Lock our stablecoins for a few months.
- Receive rewards in the native toke of the selected CEX.
- Hold a percentage of our portfolio in the Native token of the CEX.
Not all three points mention above have to be fulfil to maximise stablecoin staking earnings. The requirements to be fulfilled depends on the selected CEX.
Below table summarise the requirements for each of the exchanges.
Nexo offers very attractive rates as long as we are ok to hold at least 10% of Nexo coin in our Portfolio and receive the rewards in Nexo coin. Good thing about Nexo is the fact that we can stake the majority of stablecoins without need to lock them for a period of time.
Celsius is better to be avoided since it has stopped all withdrawals locking user funds.
Is Stablecoins staking riskless?
No. You need to keep on mind that there is certain risks linked to holding and staking stablecoins. Below are the two main ones to keep in mind at all times:
- There are risks associated to the peg. The stablecoin may lose the peg at a certain point making our coins less valuable than when we bought them.
- The second type of risk is linked to the risk associated to the platform where we hold your investments. It may be that we hold 10,000$ in a platform that suddenly is hacked or goes bankrupt for any other reason. In this case, we may lose all your funds since the amounts are not insured.
I recommend you to do your own research before investing any money with any crypto exchange mention in this post. Celsius has stop all withdrawals as of today so do not use them.
Wrapping UP
Although, we have seen that there are certain exchanges offering better staking rates than others, I would recommend you not to hold all your eggs in only one basket. If you plan to stake a considerable amount of money in stablecoins, I would advise you to split the amount in different CEX. In that case, if one of the exchanges is hacked or has any other issue, you will not lose all of your funds.
If you have found the content of the story useful, feel free to use below referral codes to open an account. By doing so, you will be rewarding my content while you also get free crypto when opening an account:
- Crypto.com: Both of us get $25 when you open an account using my referral link.
- Binance: Both of us get £100 USDT cash back on exchange fees when opening an account through the following link.
- Nexo: Both of us get $25 when you open an account using my referral link.
- BlockFi — Using the following referral link, you and me will receive 10$.
Disclaimer: This post is not intended to offer financial advise. Please note that stablecoin do not guarantee the promised returns by the platforms holding our assets. They may be hacked or in some cases mismanaged.
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