Current Market Conditions Validate Traditional POS Over Lending

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1 year ago

My Personal View

I have stated repeatedly that I prefer traditional proof of stake to lending, as the risks are considerably lower. When you consider the benchmark returns of staking against those of lending there isn’t much difference at all. This only serves to further encourage POS over lending. Once again, it all comes down to something called “risk management”. The majority of your Crypto portfolio should always be held in self-custodial wallets and not third-party platforms. This also includes DeFi by the way, which is even more inherently risky even under more stable market conditions. I would say that 10% or even 20% is more than sufficient and increasing exposure beyond this allocation would be unwise.

Some Exceptions

In the event that you need to generate a supplementary income or even a full-time income via yield generation, you could consider increasing the suggested allocation. However, you would have to ensure that you are completely comfortable with the inherent risks involved. So many lending companies are currently facing tremendous challenges, including bankruptcy. When liquidity becomes an issue it is very difficult to solve and can easily trigger the downfall of even well-established companies.

The Market Decides

It’s funny how the market has a way of validating, exposing, and even removing players at the drop of a hat. You never want to find yourself on the wrong side of the market. This is why I travel through bull and bear markets alike with at least 25% to 50% of my portfolio in stablecoins. Swan events can also arrive in the midst of a bull market. You need to have solid and definite risk management disciplines in place to ensure you always have the upper hand. Once you lose that standing you become vulnerable. Most “investors” will sacrifice that position of strength for potential gains, which is rather foolish in my opinion. I am not merely stating this now that the market is covered in blood. My previous articles are available for anyone to peruse at any time. I have been hammering these points home for years now.

My POS Decision

Over the last while, I made it quite clear that the coins I look to acquire are generally proof of stake projects. In the event that I reach my accumulation goals over time, any one of these assets could act as a backup income source. I could at any time stake a particular holding in order to have an income source. Additionally, other coin holdings would literally also become further backup income sources. Needless to say that the current prices of Solana, Avalanche, and Cardano have me pretty excited.

Final Thoughts

At the end of the day utilizing the standard proof of stake approach is far safer than any of the other alternatives such as lending and DeFi. I am looking to pick up some really “cheap” POS coins really soon, how about you?


First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.

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1 year ago