Does It Make Sense to Save With Crypto Staking Instead of a Traditional Savings Account?
No, not for traditional savings. If a client is looking for a liquid account that won’t lose value, a traditional savings account may be a better bet. While the returns are relatively low, there’s no risk the client will lose their principal or be unable to quickly access it when the need arises.
Crypto staking, on the other hand, carries many more risks that make it a less appealing savings vehicle. The volatility of cryptocurrency means that the value of the stake itself could lose value significantly.
Risks and Benefits of Staking in Cryptocurrency
Staking in cryptocurrency has many risks that investors need to understand. In addition to volatility risk, many exchanges require that crypto stakers lock up their crypto for a certain period of time, turning it into an illiquid asset until that time period passes.
As with most investments, the higher risks involved in with crypto staking also offer the promise of higher potential rewards. The returns on staked crypto are higher than those on a traditional savings account, and volatility works both ways, so there’s also a chance that staked coins could increase in value over time.
Pros and Cons of a Traditional Savings Account
The advantages of a traditional savings account are its liquidity and downside protection. The principal in a savings account will remain intact, and account owners can access them any time they want.
That said, the biggest disadvantage of a traditional savings account are extremely low interest rates. Even on high-yield accounts, the return is typically less than 1%, meaning that money in a savings account is losing value over time.