Does Your Crypto Still Grow in a Wallet?

Cryptocurrency is quickly growing in popularity; as it expands, there comes more concern to protect the assets that you purchase. There is not a lack of options; crypto wallets are available for storage and protection. Does the crypto wallet, however, affect the potential growth of your crypto?

Crypto can grow in your wallet if the price goes up as price fluctuations are independent of where your coins are stored. However, some altcoins may give you the chance to earn staking rewards by locking up your assets. That may require moving your assets to a centralized exchange, depending on the coin. 

The rest of this article will discuss different ways to grow your crypto, including through staking and lending pools. Be sure to keep reading if you want to learn of new ways to maximize your crypto profits, as well as the risks involved.

Crypto Grows in Wallets

The price of crypto is independent from how you store it. So, if you have some Bitcoin in your wallet and there’s a bull run, you’ll enjoy the profits. However to realize the profits, you have to move your coins to an exchange and sell them. 

While some people choose to leave everything on the exchange platform for convenience, it’s safer to keep your crypto in a wallet that you have control over, especially a hardware wallet. 

However, it’s not always worth it to keep your coins in a hardware wallet because the wallet itself may cost more than the crypto you want to hold. As long as you maintain the private keys to your wallet and use a reputable wallet, you’re almost entirely risk-free. 

Growing Your Coins Through Staking 

You can stake many different coins, including ADA, DOT, ATOM, and ETH 2.0. Staking is the act of earning rewards by locking up your crypto. One of the easiest ways to earn passive income through crypto is by placing your coins in a staking pool. 

Staking pools are managed by a pool operator, and the rewards are divided amongst the participants. The more coins you have staked, the greater your return will be. There are two main places you can stake your crypto coins: in your wallet or on an exchange, like Coinbase.

Staking on a Centralized Exchange

Staking on a centralized exchange is one way to earn passive income on your crypto. Most exchanges utilize staking pools, where participants can stake a certain amount of crypto. How it works is the rewards are paid out as a percentage of the participant’s stakings. So, you won’t notice a huge return if you only stake a small amount. 

In general, staking on a centralized exchange is a simple process. Once the crypto is staked in the pool, the participant doesn’t have to do anything else. One of the most popular exchanges that people use for staking is Coinbase because it’s a reliable service and highly user-friendly.

Staking Directly on Your Wallet 

Crypto wallets are more secure than centralized exchanges because they give you full access to your private key. On an exchange, you don’t have access to it. 

You might be wondering why it’s so important to have access to your private key, and the answer is simple: your private key gives you access to your crypto. So if any other entity or person has access to that key, your crypto is at risk.

As a result, you technically don’t own your crypto outright if you leave it on an exchange. 

Another reason why centralized exchanges aren’t the safest place to store and stake your crypto is that exchanges are more susceptible to hacks. To avoid these issues, you could consider storing and stacking your crypto in a wallet.

There are two types of wallets:

  • Hardware wallets
  • Software wallets

Hardware wallets are the most secure because they’re not connected to the internet, meaning they’re the least susceptible to hacks. However, if you’re looking to grow your crypto and earn some rewards, it’s easier to stake on a software wallet.

The wallet you use will depend on the cryptocurrency you’re holding. For example, you can use Yoroi wallet if you want to stake ADA. Or if you want to stake ATOM, you can choose a wallet like Atomic. Wallets generally work the same way as exchanges when it comes to staking, so it’s up to you to decide which platform you prefer.

Other Ways of Earning Crypto 

Although staking is one of the most popular ways to earn extra crypto, there are some other activities you could consider. One popular way to earn passive income from your crypto is by lending your crypto to a liquidity pool.

Lending and borrowing generally occurs in decentralized exchanges (DEXs), where users can lend and stake their coins to earn interest fees. Here is how it works:

A user wants to borrow some crypto, so they navigate to a decentralized exchange like Uniswap. From there, they choose a liquidity pool to borrow from. When they decide on which pool they’ll borrow from, they will post collateral in the form of crypto.

The lenders are the users who place their crypto into the liquidity pool so that other users can borrow it. Then, the borrower must pay interest on the loan, and those interest fees are paid out to the liquidity providers. 

So, by adding liquidity to a lending and borrowing pool on an exchange like Uniswap (a process also known as yield farming), you can earn consistent interest fees.

Crypto as an Investment

Although investing in crypto can have great benefits, there are also some risks to consider. One of the biggest dangers of investing in crypto is the volatility. The value of a coin can change drastically in a matter of minutes, so you should only ever invest an amount you can afford to lose.

Try not to buy in when the price is at a peak and try not to sell when the price plummets because it could eventually come back up. But at the end of the day, no one can predict what will happen, so always be cautious and use your best judgment.

Additionally, staking can be risky because many wallets and exchanges have a locking period. This means that if you decide to unstake your crypto, you may need to wait a few weeks until you can access it. So, if the value drops rapidly, you won’t be able to sell before it drops even lower.

Plus, staking becomes less valuable when the value of the crypto drops. One day, your stakings could be worth a lot, and the next, they could be worth almost nothing.

Adding liquidity to a pool also has its downsides, the most prominent being impermanent loss. This occurs when the market value of your crypto changes after adding it to a pool, so when you remove it from the pool, you could be at a loss.

Conclusion

There are different ways to grow your crypto in your wallet or on an exchange. The most popular ways include staking, trading, and yield farming. It’s best to stake your crypto on a wallet rather than an exchange because it’s more secure and gives you full access to your private key. 

Adding liquidity to a pool is another excellent way to earn passive income on your crypto, as it allows you to earn interest fees. However, due to the volatility of crypto, there are risks involved with adding liquidity, staking, and trading.

Sources 

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