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Featured Trader of the Week: @myholdings

Featured Trader of the Week: @myholdings

@myholdings takes on the spotlight for this week’s featured trader as he shares his knowledge and insights on stocks from the PSEI. 

In a quote by David Sikhosana, he says “Losses are necessary, as long as they are associated with a technique to help you learn from them”. Given the state of the economy and the many uncertainties in the market, we must be able to anticipate changes and adjust in order to succeed and make money. @myholdings has acted in this way.

Our featured trader gave us his opinions on SMPH, the direction it might be headed in, and the disintegration of the real estate market as a result of high interest rates about 13 days ago. The market’s current state allowed @myholdings to forecast where the price could go.

During this specific trading period, @myholdings has plotted out a simple support line in the weekly time-frame starting from 26 up to 36. We can also see that the price has broken down from its previous support line and that the next possible direction is around 31.43 down to 27.80, as plotted by @myholdings. Typically, breakdowns indicate signs of bearish price action movement which is why @myholdings anticipated a drop in price in the days to come. Take notice also of the fundamental analysis of the stock which is quoted in green text. The P/BV is at 2.8686 meaning that the stock still has potential for future growth. The PE ratio is 40.54 which could be a problem since average PE ratios range from 20-25. Lastly, the Return on equity is 7.29% which is also considered low considering the fact that good ROE’s range between 15-20%. 

TECHNICALS OF THE TRADE

Technically, SMPH at the time was losing its uptrend momentum, breaking down from its previous support on the weekly timeframe. We may also see that the RSI, a momentum indicator, has broken down from its 50 levels which indicates that traders are starting to sell their positions considering everything going on in the market. Moreover, if we take a look at its MACD, a trend-following momentum indicator, we can see that it was diverging downwards which is usually a sign of a downward trend movement. All this being considered, @myholdings was able to forecast that the price would continue its downward movement following the recent breakdown in the chart. 

FUNDAMENTALS OF THE TRADE

SM Prime Holdings Inc. announced a long-term agreement for the supply of renewable energy with Aboitiz Power Corp. By the end of the year, this long-term agreement will power all SM Prime properties, including its shopping malls, apartments, offices, hotels, and other institutions covered by the Retail Competition and Open Access. According to the deal, AboitizPower would provide SM Prime with electricity from the PV Sinag’s Power Plants, Tiwi and MakBan Geothermal Power Plants, and other facilities run and managed by a subsidiary of AboitizPower called Aboitiz Renewables Inc.

Source: https://businessmirror.com.ph/2022/08/08/clean-energy-to-power-sm-malls/

WHAT SHOULD BE MY NEXT MOVE

In the weekly timeframe, SMPH is seen to be touching previous support levels now turned resistance. This could indicate that the price would bounce back and head downwards. Its current RSI has just recently visited the oversold levels which could mean that prices may start to go back up now. However, if we look at the MACD, it doesn’t seem like it would be the case since there doesn’t seem to be any signs of reversals. Moreover, the price action is very parabolic, meaning that the current green candle that we see could just be a “dead-cat bounce”, a temporary short-lived price recovery followed by a continuous downtrend movement. 

With the PSEI and economic status being in a bad state, it is best to be very cautious about your trades and the positions you are holding.

Despite being a blue chip stock, let us not take for granted the fundamental and technical factors that could affect its price in the market. With the given market conditions, it would be best to buy the dips without using too much of your capital. Always stay updated with relevant news for the stock you’ve chosen and practice due diligence. 

Once again, KUDOS to @myholdings for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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Investa App: A Hassle-Free Investing Platform

The Investa app is our very own investing platform that allows users to invest in mutual funds. Investing through Investa is as simple as just clicking a few buttons once your account is all set! Let’s look at what the investing platform has to offer, and how easy it is to invest in mutual funds through it.

Get to know our investing platform’s partners

Investa has partnered with some of the best performing mutual fund companies in the Philippines: PhilEquity, BPI, SunLife and ATRAM. Partnerships were made with these companies to promote financial inclusion and affordable investing to millions of Filipinos! With Investa, you can buy their funds with ease! Here is a quick overview of what each mutual fund company offer:

  • PhilEquity – The ideal choice for investors who wish to engage in the stock market but lack the time and knowledge to do so is Philequity Fund (PEFI), which has been acknowledged for its exceptional record since its founding in 1994.
  • BPI – Focuses on funds that emphasize on inexpensive and lower beta names, shorter durations, and diversification strategies consistent with capital preservation in order to generate appealing risk-adjusted returns.
  • SunLife – Is a leading international financial services organization providing protection and wealth products, financial planning and retirement solutions.
  • ATRAM – Suitable for investors with a moderately aggressive risk profile while also being managed by an award-winning fixed income team.

Of course, this is just a very generalized overview of their fund management methodology. If you wish to learn more about their specialized approaches to the different funds they offer, you would have to go over the specific fund’s prospectus, which will be talked about later on.

How do you get started with our investing platform?

To begin trading mutual funds with the Investa application, head on over to the Investa app and sign up or log-in. For those who don’t have an account yet, let’s walk you through the steps. 

Your personal and contact information will be asked for to create your profile. Additionally, information such as your sources of income and relevant disclosures are needed. Don’t worry though, as all our data is protected and we ensure you that no one will ever gain unwanted access to your information. You will also be asked to create a 6-digit pin. This pin is IMPORTANT as you will need it to confirm your transactions.

Agreements and Documents

You will be asked to sign some forms and agreements after you provide your information. Documents will also be needed in order to verify your identity. When the selfie with your ID is asked for, make sure that your face is visible along with your picture in the document to make sure there aren’t any problems when your identity is being verified.

Risk Profile

Financial market investing is always risky to some extent. The degree of risk a person is ready to tolerate while investing is known as their risk profile or risk appetite. Before you can invest in mutual funds, you will need to fill out a risk profile survey which will help determine a proper investment asset allocation for your portfolio.

There are 3 types of risk profile scores: Conservative, Moderate & Aggressive

  • Conservative – prioritizes asset preservation above capital growth.
  • Moderate – equal importance to lowering risks and maximizing revenue
  • Aggressive – may aim for financial gain despite the potential risks of the investments.

Made a mistake or want to update your risk appetite? Investa allows its users to do so by contacting their user support email support@investa.ph

The investing platform itself

The account creation process should only take 24 hours if there were no setbacks with the documents asked for. Once you finish, you are greeted with the Investa homepage

Don’t know how to get started or want to know more about Mutual Funds? We got you. We have different sections to help your every need. From knowing what mutual funds are, to understanding how they work. We also have an FAQ section if there are any further questions. 

To begin with investing in Mutual Funds, start topping up your account through the following payment methods. Payments are fast and usually processed within the day or the following day. 

Topping-up is very easy with our different payment channels. The amount should reflect in the same day for most of our payment channels if the amount is less than PHP10,000. Once you have successfully topped-up your account, click on explore then scroll down to categories for you to check out the different ways you can invest in Mutual Funds.

Once you have chosen a category, start choosing a fund that you feel will suit your needs. Relevant information such as their YTD profits as well as risk type are also provided for users to check out. 

Once you have chosen your Fund, click on Invest Now to start investing Mutual Funds! If you want to learn more about the Fund’s prospects and methodology, documents are easily accessible on the right side of the page

Be sure to take note of the following information listed below the page to know more about the fund’s details. These will help you know how much you would need to start, how much you can add as an additional investment, and more. Keep in mind that funds usually have a minimum holding period. For this example, you need to hold the fund for 7 days or else you’ll be charged with a 1% fee.

To keep track of your investments, click on Portfolio. It will show you the current status of your investments such as the total profits, losses, and portfolio value. 

Don’t forget to check out the Prizes feature and complete tasks in order to win rewards from Investa!

When is the best time to invest?

As they say, the best time to start investing was yesterday. The next best time to start is today. Start your investing journey here with us at Investa as we help you achieve your goal of becoming financially independent. What are you waiting for? Create an account now and start investing in mutual funds through Investa, our very own investing platform. 

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Featured Trader of the Week: @apsia2018

@apsia2018 takes on the spotlight for this week’s featured trader as he shares his knowledge and insights on stocks from the PSEI. 

In a quote by Michael Carr he says “Don’t worry about what the markets are going to do, worry about what you are going to do in response to the markets.” His quote perfectly depicts how we should react to the market that we are in right now. With so many uncertainties, we must be able to be ready and adapt to the market situation to win and earn a profit. This is what @apsia2018 has done.  

Just recently, @apsia2018 shared his insights on LR about where to take entry and make a profit.

About 16 days ago, our featured trader showed us his thoughts on LR, the possible direction it could be heading, and his long-term plans for the stock. Despite the many uncertainties, @apsia2018 was positive that the stock would skyrocket in the days to come. 

During this specific trading period, @apsia2018 has plotted only multiple technical indicators which would help him predict price actions for his trading plan. As we can see, he has included bollinger bands and multiple EMA indicators which allows him to identify the average price of the stock for a specific amount of time. The price, as shown in the chart, is seen to be above all the plotted MA’s indicating an upward trend. He also included the RSI, a momentum indicator that allows traders to identify whether or not a stock is oversold or overpriced. As seen in the chart, the stock is not yet even at its oversold level, indicating that it still had the strength to push the price higher. This allowed @apsia2018 to grab the opportunity and put a call to trade LR. 

TECHNICALS OF THE TRADE

Technically, LR at the time was building momentum heading towards an uptrend movement. 

At a glance, we may notice that an increase in volume is seen to be taking place with prices slowly rising. We may also notice that RSI, a momentum indicator, was rising as well, which indicated strong buying activity in the market. It was also not at its oversold levels, indicating that it had more chances to go higher. MACD, a trend-following momentum indicator, was also seen to move in a positive direction as it diverges upward indicating bullish momentum. These indicators alone showed great signs of a breakout, which did happen after a couple of trading days. Many of those who grabbed the opportunity were lucky to earn great profits. 

FUNDAMENTALS OF THE TRADE

The Leisure & Resorts World Corporation (LRWC) announced that its 2Q 2022 EBITDA was positive. The Company was able to achieve Php 105 million in EBITDA for the second quarter of 2022, a 216% increase from last year’s EBITDA loss of Php90 million. This was made possible by the restart of the majority of its site operations and the introduction of its technology platform.

In the meantime, LRWC’s consolidated revenue increased by up to 250% on an annual basis to Php1.7 billion, producing a gross profit of Php 349 million. Despite its operating expenses more than doubling to Php 244 million, it still reported a net loss of Php 33 million for the quarter, a significant improvement of 85.51% from the 2Q loss of Php 230 million the prior year.

With the quarantine restrictions lifted and the majority of the population adjusting to the new normal, LRWC anticipates continued revenue growth, particularly in its retail segment.

Source: https://edge.pse.com.ph/openDiscViewer.do?edge_no=b60bba0ebcaaee3e3470cea4b051ca8f

WHAT SHOULD BE MY NEXT MOVE

In the daily time frame, LR is seen to be closing into its 52-week high with its current price being very overbought. This could indicate a possible reversal soon causing its price to plunge from its current levels. You may also notice that volume is starting to decline meaning people who bought earlier are planning to sell their positions soon. Moreover, the MACD indicator is showing signs of reversal, though it may not clearly show a cross, the gap is seen to be closing in together. 

With the PSEI and economic status being in a bad state, it is best to be very cautious about your trades and the positions you are holding.

There are multiple signs of a reversal for LR, so if you’ve bought earlier and are currently in a gain, it would be best to sell some of your current holdings since the price could drop any time soon. While that is at it, be sure to buy during the dips as the fundamentals of this stock currently show positive outlooks for the future. 

Once again, KUDOS to @apsia2018 for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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USDPHP: Is the PH Currency the Worst Performer This Year?

The USDPHP exchange rate hit its highest level ever and is STILL continuing to climb. Last September 27, the rate reached as high as PHP59 per 1 USD. Year to date, the Philippine Peso has devaluated by roughly 14%. However, the case here is not due to domestic issues but mostly cause of the green back’s strength. The U.S. dollar has been very strong across all currency pairs. The Dollar Currency Index has rallied by more than 19% throughout the year. We’ve seen some unusual things happen due to this. The Euro and Dollar reached parity (1:1) for the first time in two decades. Although technically not allowed, the Bank of Japan conducted a currency intervention to support the yen.

Since the majority of currencies around the world have been weak against the USD this year, this begs the question: how does the Philippine Peso rank against the other major currencies? To gain insights, we ranked some of the popular currencies.

Understanding how currency values are tracked

Before looking at performance comparisons, let’s first understand how currency values are tracked. In the foreign exchange market, tickers consist of the two currencies’ abbreviations. It can be read as how much the first currency would cost in the second currency. For example, the USDPHP hitting 59 would mean it would take 59 PHP to buy 1 USD. 

To arrive at a better gauge of how different currencies have performed versus the dollar, we used the rates for how much of a certain currency is needed to buy 1 USD. This is for the purpose of the performance having a uniform method while also highlighting more of the different currencies’ performance rather than the dollar’s.

How does the USDPHP stack up against other currencies?

Despite USDPHP reaching all-time highs, the Peso isn’t the weakest currency in the market right now. The Japanese Yen has devalued the most by a large margin, going down by -28.66% versus the Dollar. The British Pound and New Zealand Dollar followed suit, with YTDs of -20.64% and -17.81% respectively. While a majority have devalued against the dollar by double digits, some have been relatively resilient. The Hong Kong Dollar rarely sees any volatility so its no surprise that it has been relatively stronger. The Singaporean Dollar and others however have fared well against the U.S. Dollar. Overall, the Philippine Peso is only in around the middle of the pack in terms of performance. However, when comparing only South East Asian countries, the PHP has lost value the most amongst its peers.

What has been the main mover of the USDPHP?

There are many factors that can affect the valuation of a currency. However, the main catalyst in FX market lately has been interest rates. The Philippines has been raising rates, but not as aggressively the United States. Whenever a country raises interest rates, its bonds become more attractive to investors. As foreign funds buy those bonds, they need to first buy the country’s currency. In effect, this raises demand for the currency causing its value to rise. Since inflation went out of control months ago, the Fed (U.S. central bank) had to raise interest rates at a fast rate. As rates keep on increasing, people have flocked to U.S. treasuries – pulling up the value of the dollar.

With interest rates at a disparity, the dollar gained strength causing it to rally – and the Philippine Peso to fall.

What are the implications of the USDPHP’s rise on the economy?

Many of our OFWs will benefit from the higher exchange rate. However, since most global trade is denominated in USD, importation costs are expected to rise. With the Philippines being a net importer, businesses and households shoulder the burden of increased prices domestically. This would often cause inflation to rise faster than usual.

The country’s debt is also affected given that debt is often denominated in dollar. With the dollar aggressively rising, a lot of countries have been put at risk of a default. Although the Philippines isn’t likely to experience a default, the increased cost is still a burden. 

What we should expect moving forward

Jerome Powell, the U.S. Fed’s chairman, made it known that they will continue to be hawkish. Meaning, everyone should expect interest rates in the U.S. to stay at elevated levels. Further rate increases are also possible given that they have fully committed to bringing inflation down. Until we get confirmation that inflation has already been beaten, the U.S. dollar might continue to stay at a high valuation. 

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OFFICIAL: Investa partners with ATRAM Alpha Opportunity Fund, Inc.

IT’S OFFICIAL: Investa partners with one of the Top-Performing fund management companies in the Philippines — ATRAM Alpha Opportunity Fund, Inc.

Last September 23, Investa held a live event in partnership with ATRAM as they discussed what lies ahead in the market and the importance of investment opportunities in Mutual Funds investing.

Officially Starting Off the ATRAM x Investa Partnership

Kahane Pe, a business development associate of Investa, started off the event celebrating a major milestone for Investa. A partnership has been officially created with ATRAM, with the goal of helping more Filipinos become investors through mutual funds. He then further discussed the importance of mutual funds and why it is important for investors: the answer being simplicity. As not everyone has the time to keep tabs on the markets, mutual funds were mentioned to be the solution. Rather than having to craft your own strategies and research, allowing professional mutual fund managers to handle your money makes investing a simpler task to accomplish.

ATRAM’S LOCAL MARKET OUTLOOK

ATRAM’s Portfolio Manager Equities, Carlos Navarro, followed the event sharing his thoughts on the local market outlook in which he expects continued volatility as the PHP depreciates. However, he expressed that we are not lacking opportunities as these are the types of market corrections that traders should take advantage of.

Carlos believes that peeking inflation will allow the spread of the equity market over the past 10 years to get back to normal levels. He stated that if inflation peaks, interest rates will go down which will improve the spread of the equity market over the 10 year government bond. The result of this will then make the equity market more attractive to investors compared to the fixed income market. 

Carlos then continues his talk showing to us ATRAM’s earnings tally in which stocks have achieved expected corporate results. As shown, the earnings for the first half of 2022 have beat their expectations of 20.5%. Do take note that they have excluded outliers such as SMC, LPG and JFC as it would exponentially increase their earnings growth figure.

One of the favorable sectors that ATRAM would like investors to take a look into is banking. Carlos stated that reasons such as loan growth, expanding net interest margins, and improving asset quality are why investors should look into this sector. 

GET TO KNOW ATRAM’S ALPHA OPPORTUNITY FUND

Dionill Jamill, a manager of ATRAM, then continues the presentation talking about ATRAM’s Alpha Opportunity Fund and how they set themselves apart from their competitors in the industry. 

ATRAM’s investment philosophy was presented, which serves as the organization’s road map that helps executives and staff members understand the objectives and principles the company is constantly pursuing.

Before ending his presentation, ATRAM’s manager, Dionill Jamill, showed to us the company’s stock picks that they believe will perform well in the long run. 

START INVESTING NOW!

Last September 21, we’ve officially announced the partnership of Investa and ATRAM. Prior to this, an official MoA signing was held months ago to kick off the partnership. Now, Filipinos have easier access to investment opportunities to build a more financially secure future. This allows traders to invest for as low as Php1,000 in ATRAM’s top-performing funds via the investa app! 

“The partnership between ATRAM went through different people, and different channels. It took time, but it was definitely worth the wait” says Erwin Angeles of Investa. 

With Investa being official partners with  ATRAM Alpha Opportunity Fund, Inc., you can now invest in their mutual funds through the Investa platform. Start investing now by visiting Investa.

“For those of you who are working in the market, I mean, I know there’s a lot of volatility right now, but like what I said, these are the times where the biggest opportunities arise during this huge correction. So just stay focused and do expect a better 2023 compared to 2022, and of course, just branch in and leave it to the professional managers, and we’ll take care of the rest”, says Carlos Navarro, Portfolio Manager of ATRAM.

To wrap up the story, we are proud to announce that we now have 4 official partners: PhilEquity, BPI, SunLife and ATRAM, to bring financial inclusion and affordable investing to millions of Filipinos!

Here at Investa, we will continue to help Filipinos become smart and profitable investors by providing you with services through our easy to use app that will guide you in your journey to become financially free. Keep a lookout for more updates and partnerships to come here at Investa!

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Featured Trader of the Week: @ivana27

Our featured trader of the day keeps it simple with basic but very useful indicators! With that, let’s give a round of applause and congratulate our featured trader of the week @ivana27!

According to Alexander Elder, “The goal of a successful trader is to make the best trades. Money is secondary”. His saying reminds us not to get eaten up by our emotions, but to be consistent with our wins as a trader. To win in the market, one must be able to read and analyze carefully the price action of the market he/she has chosen, which is what @ivana27 has done. 

Just recently, @ivana27 shared his insights on BTC and the possible direction it could go in the following days to come.

It was about 4 days ago that our featured trader showed us his thoughts on $PSEI, the overall market status of the Philippines. With concerning global economic conditions and an increase in interest rates, many traders are still unsure whether to buy or sell. 

During this specific trading period, @ivana27 has plotted only a few technical indicators which would help him predict price actions for his trading plan. As we can see, he has included RSI, a tool which allows traders to identify whether or not a stock is oversold or overpriced, and the MACD History divergence, an indicator which lets us know if moving averages are forming a new trend. We can also observe that a head and shoulders pattern is being plotted out in the chart. This is usually a sign for a downward trend movement. 

TECHNICALS OF THE TRADE

In the past few trading days, the PSEI has experienced downward movements causing its price to stumble from 6,800 to as low as 6,200. The current price of $PSEI makes it no better as all MA’s from 5 to 100 are not in par with its last trading price. This also means that a downward trend is taking place in the market. Moreover, we can see that the PSEI is trading within the 30 RSI levels indicating that it is close to being oversold. As for its MACD, there are still no clear signs of reversal making it seem like we are still stuck in bearish territory in the days to come. A spike of volume was seen last September 16 followed by a consistent amount of trading volume in the following days. 

FUNDAMENTALS OF THE TRADE

Just recently, the BSP has raised interest rates to 4.25% as  the Peso continues to devalue versus the dollar. Following a 50-bp upward adjustment in August, the Monetary Board has decided to increase the policy rate by 50 basis points, or half a percentage point. In the meantime, Philippine inflation last month slightly decreased to 6.3%. As a result, the average inflation rate increased to 4.3%, which is still above the BSP’s target range of 2-4% for 2022. 

WHAT SHOULD BE MY NEXT MOVE

In the daily time frame, PSEI is seen to have broken its support line, which is often a bearish pattern. It is currently trading above around 6,300 levels while barely maintaining the 0.236 fibonacci support level. From here, we can anticipate a short-term bounce up to the 6,370 levels, after which another rejection is possible.

With the PSEI barely holding its support levels and the terrible market conditions going around, we may not be able to see any reversal in the next few days.

There are barely any signs of reversal, and despite the RSI being close to oversold, other indicators such as the MACD are still on its downtrend bias. The fibonacci support level of 0.236 has been recently tested by the PSEI and has barely managed to bounce back up during its closing price. 

Dollar cost averaging would probably be your best choice given the abundance of FUD in the market and the current state of the world economy. A great way to gradually build up your portfolio and benefit from the global economic situation would be to buy the dips with small percentages of your total capital. Make sure to also read news reports updated from the BSP as well as political news which could affect market status. 

When trading, always buy the fear and sell when everybody else is happy. As what @ivana27 said, always do your own research and trade smartly. Once again, KUDOS to @ivana27 for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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Cryptocurrency Staking: Earn Passive Income Using Cryptocurrencies

With digital assets being a hot topic in recent years, cryptocurrency staking is one strategy that traders use in order to generate passive income. By simply delegating and locking up crypto holdings, traders are able to earn rewards such as earning additional tokens and getting some voting rights.

But in order to profit from it, one must first grasp the fundamentals in order to make their investments more efficient. The article below will help you get started on understanding what staking is and why it should be considered for traders. 

What is Cryptocurrency Staking?

The general idea behind cryptocurrency staking is that it involves agreeing to provide a blockchain network with a percentage of your cryptocurrency. The blockchain network makes use of your cryptocurrency for network improvement, such as better compliant transactions.

It’s also best to keep note that higher staking risk offers back higher rewards

Staking is thought to be a unique way of supporting transaction confirmation. Despite it being one of the passive ways to earn money, crypto staking is not made available for every coin in the market. It is only accessible through coins that employ the proof-of-stake model (PoS). Compared to the proof-of-work model, it is more effective at confirming transactions and consumes less energy.

What is Proof-of-Stake?

Cryptocurrencies use the proof-of-stake consensus algorithm to process transactions and add new blocks to a blockchain. A consensus mechanism is a procedure for approving database inputs and maintaining the database’s security. In the context of cryptocurrencies, the database is referred to as a blockchain, and the consensus mechanism protects the blockchain.

Crypto developers employ proof-of-stake (POS) to validate block transactions based on the number of coins staked by a validator. In terms of the risk of a network attack, proof-of-stake (POS), which structures compensation in a way that makes an attack less advantageous, is considered to be less risky. 

Proof of Work

Powerful computers used by miners must solve challenging puzzles in the proof of work consensus algorithm. To solve the problems, the trial and error method is used. A proof-of-work system requires powerful computers. However, POW requires a lot of power, transaction times may get slower as the network grows.

The proof of work model has drawn a lot of criticism due to the enormous amount of energy it consumes, which worsens the effects of global warming. This has caused China to prohibit cryptocurrency mining for the same reason in order to lower carbon emissions and lessen the effects of global warming.

What can I benefit from Cryptocurrency staking?

Cryptocurrency staking can be beneficial not only for traders but for the whole blockchain ecosystem as well. In an article by Banerjee (2022), here are some of the benefits:

Environmentally friendly

The mechanism used in staking uses very little energy, which ultimately benefits the environment. It is significantly better than crypto mining because it does not require a lot of computational power.

The Blockchain Network Benefits

Staking cryptocurrency makes the blockchain network’s transaction processing more effective. In addition to this, it helps the system maintain a high level of security and reduces fraud.

Aids in Increasing Interest

One of the best ways for investors to earn a sizable sum as interest is by staking cryptocurrencies. In general, it can give you good returns. But, bear in mind that there are also some risks which we’ll cover in the next section.

What are the drawbacks of Cryptocurrency staking?

Staking crypto will also have its drawbacks which could be a problem for most. The following are considered to be problems of staking:

Impermanent Loss

Impermanent loss is a common downside of cryptocurrency staking that puts the entire crypto market in danger. Due to the extraordinary volatility of the cryptocurrency market, the value of tokens can fluctuate significantly in just a few hours. Therefore, while you are staking a coin it might lose a lot of value while it’s staked.

Theft

There is always a possibility that your wallet will be taken. Since the emergence of blockchain technology, cryptocurrency theft has significantly increased. It puts both cryptocurrency owners and the daily services they depend on in peril. The fact that your money is “frozen” during the staking time does not ensure its security, either. So be sure to use a reliable wallet to prevent it from happening. Research the wallets that are best for you.

Lockup periods for Cryptocurreny Staking

Some stakable assets in the area of cryptocurrencies have a lock-up time. You cannot unlock an asset that has been locked for a predetermined period of time until that period has passed. There is nothing you can do, making you powerless. This could have a big impact on your overall investment. For this reason, it is suggested that you use cryptocurrencies that offer staking without lock-up periods. The staked cryptocurrency will be within your control here.

What we learned so far cryptocurrency staking

Staking cryptocurrency is a great way to establish a steady passive income stream. Making wise investments is the only thing needed. Staking can be viewed as the future of cryptocurrencies because it uses the proof of stake paradigm, which is far more environmentally friendly than the proof of work strategy.

Just remember that before venturing into staking, take the time to get to know the coins you’ll lock into. Do your own research and analysis and always do your due diligence when trading. 

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