Staking Rewards: The Best Hope for Crypto During the Recession
News of record high inflation and the federal reserve's plan to increase interest rates this year has a lot of people worried that a recession (probably on a global scale) is coming this year. After over a decade of constant growth in the US stocks and real-estate markets, we're finally going to see the bubble pop. GDP is down, governments are broke, and
I would argue that the "craze" of the last few years in stocks, housing, and even NFTs were driven by low-interest rates that encourage people to speculate rather than save - the act of buying "useless" NFTs, in a way, makes "sense" when compared to the alternative - earning almost nothing on savings and CD accounts. (The crypto "crash" we see in the last few weeks is a result of "crypto-curious" money exiting the space - most of which run in parallel to the fiat markets as a whole.) As interest rates get higher and higher over the next few months, however, that script is likely going to get flipped on its head.
If the crypto industry adapts fast enough, they can take advantage of the fact that the banks are still dragging their feet in terms of offering better interest rates - staking rewards are currently outperforming the savings rates of most banks by a very wide margin and is a much easier sell to the average person out there just trying to protect their money. (The idea of buying NFTs of apes and rocks as your future nest-egg will start to sound more silly as time goes on, I think.)
In a way this marks the end of the speculative-NFT era for the crypto industry, and possibly the end of the dominance of the proof-of-work model itself. Prior to the big "crash" a few weeks ago, many proof-of-stake coins Tezos (XTZ), Chainlink (LINK), Cardano (ADA) saw blips of independent movement as the rest of the market continued to tumble. If this trend continues over time (since these projects are actually offering something of value to its users - interest and real returns) we may start to see lesser-known contenders in the space rising to the top of the charts. (Ethereum is currently in limbo right now, at least until they finally do their ETH2/Consensys/"merge" in August - they've taken outsized losses this week due to the come-downs of the NFT craze.)
As mentioned a few times before, Bitcoin may be in big trouble because the thing people are going to be looking for - interest rates - isn't something they're able to offer on any level, especially after the market goes into a downturn this year. All those years the mining community spent blocking money supply and block size upgrades may finally come back to bite them - the "flippening" may already be on its way. (And Ethereum too, if they fail to adapt to the new landscape - time will tell.)
I would argue that the "craze" of the last few years in stocks, housing, and even NFTs were driven by low-interest rates that encourage people to speculate rather than save - the act of buying "useless" NFTs, in a way, makes "sense" when compared to the alternative - earning almost nothing on savings and CD accounts. (The crypto "crash" we see in the last few weeks is a result of "crypto-curious" money exiting the space - most of which run in parallel to the fiat markets as a whole.) As interest rates get higher and higher over the next few months, however, that script is likely going to get flipped on its head.
If the crypto industry adapts fast enough, they can take advantage of the fact that the banks are still dragging their feet in terms of offering better interest rates - staking rewards are currently outperforming the savings rates of most banks by a very wide margin and is a much easier sell to the average person out there just trying to protect their money. (The idea of buying NFTs of apes and rocks as your future nest-egg will start to sound more silly as time goes on, I think.)
In a way this marks the end of the speculative-NFT era for the crypto industry, and possibly the end of the dominance of the proof-of-work model itself. Prior to the big "crash" a few weeks ago, many proof-of-stake coins Tezos (XTZ), Chainlink (LINK), Cardano (ADA) saw blips of independent movement as the rest of the market continued to tumble. If this trend continues over time (since these projects are actually offering something of value to its users - interest and real returns) we may start to see lesser-known contenders in the space rising to the top of the charts. (Ethereum is currently in limbo right now, at least until they finally do their ETH2/Consensys/"merge" in August - they've taken outsized losses this week due to the come-downs of the NFT craze.)
As mentioned a few times before, Bitcoin may be in big trouble because the thing people are going to be looking for - interest rates - isn't something they're able to offer on any level, especially after the market goes into a downturn this year. All those years the mining community spent blocking money supply and block size upgrades may finally come back to bite them - the "flippening" may already be on its way. (And Ethereum too, if they fail to adapt to the new landscape - time will tell.)
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