In the traditional financial markets, the most common interest-bearing investment vehicles are bonds, dividend yielding stocks, and high yield savings accounts. Each has its pros and cons, but how do they compare to the cryptocurrency “investment vehicle” of PoS staking?
To help you understand how traditional interest-bearing investment fare compared to cryptocurrency staking, Bitcoin Market Journal has analyzed and compared PoS staking rewards with returns of traditional investments.
PoS Staking vs. Traditional Interest-Bearing Investments
Staking is the process by which users place a specified amount of digital assets in a wallet for a certain period of time all while earning Proof of Stake coins. The coins that one stakes act as validators on the blockchain to ensure efficient transactions. The “reward” for staking your coins is just that… more of that same coin!
Proof of Stake, therefore, compares well to savings accounts requiring a minimum balance to earn a certain amount of interest, as well as other interest-bearing investments.
A number of banks offer high-yield savings accounts to lure consumers to their other products. The top savings accounts have an Annual Percentage Yield (APY) somewhere between two to three percent. Our comparison includes some of the most well-known and highest yield accounts on the market today from banks such as Goldman Sachs and Discover.
Dividend Yielding Stocks present a more ambitious investment opportunity. Many blue chip stocks offer their stakeholders a quarterly dividend to incentivize the purchase and continuous holding of the stock. The investor receives a dividend that is calculated using the stock’s dividend yield and purchase price. Companies typically pay their dividends in cash on a quarterly basis.
Bonds are the final asset class in our analysis. Since private investors usually invest in bonds though bond funds, we have looked at bond fund returns for our study. Bond funds are investment funds that invest in a range of fixed income securities, including government, corporate, municipal, and convertible bonds.
Analysis
For our comparative analysis, we have compared a range of savings accounts, dividend stocks, bond funds and leading PoS coins.
Conclusion
Each individual investor has his or her own financial goals when allocating money to different investment vehicles. The first step in reaching any investment goal is to beat inflation. Inflation in the United States historically averages 2.5 percent per year, meaning your money should appreciate at least 2.5 percent in order to maintain its value. Otherwise, your money will actually lose its value sitting in a low yield savings account.
The clear and obvious choice to beat inflation with next to no risk is a high-yield savings account. As long as the account requirements are met, it’s the safest option to maintain the value of your money.
On the other side of the spectrum, dividend yield stocks offer the highest possible reward when factoring the potential increase in stock price. The cash dividends will remain constant based on the purchase price of the stock no matter the price fluctuations, but investors must be sure they evaluate the company’s liquidity and volatility prior to buying shares for the quarterly dividends.
Bonds are somewhere in the middle as they are generally less risky than stocks but offer better returns than high-yield savings accounts. Albeit, with a more risk attached.
Finally, we have PoS coins. For digital asset investors who are looking for interest-bearing investments within the cryptoasset space, staking coins offer an exciting investment opportunity. However, expected annual staking yields of several of the leading stakable digital assets do not necessarily exceed expected returns from dividend stocks and bond funds. Moreover, staking coins are much riskier than any of our listed traditional investments.
PoS coins are, therefore, more for the die-hard digital asset investor who wants to earn interest in the form of new coins as opposed to the average, risk-averse investor who is primarily interested in generating the highest possible returns given the level of risk they are comfortable with.
Related Articles:
- Staking Cryptocurrency: A Beginner’s Guide on How to Stake Coins in 2019
- Best Staking Coins, Rated and Reviewed for 2019
- What Are Staking as a Service Platforms and How Do They Work?
Subscribe to Bitcoin Market Journal to stay up to date with the latest trends in digital asset investing.
