Happy Thursday, advisors!
In today’s newsletter, John Keller from Morgan Stanley Investment Management compares staking through an ETP, an exchange and a self-custody wallet
Then, in “Ask an Expert,” Waseem Salim, CEO of Valdora, on the due diligence that protects clients from validator slashing
Happy reading.
– Sarah Morton
Where investors stake crypto shapes how much of the reward they keep
Staking refers to locking up a proof-of-stake cryptocurrency, such as Ethereum’s ether ETH$2,273.62 or Solana (SOL), to help validate network transactions in exchange for protocol rewards. Transaction validation is essential for the security of decentralized blockchains, so holders are paid to commit their tokens. Staking rewards differ by blockchain and vary over time based on network activity and demand for staking among token holders.
Investors have different ownership options for cryptocurrencies, and each has different implications for staking. They can invest in an exchange-traded product (ETP) that holds the underlying token, they can hold their tokens on an exchange, or they can self-custody using a digital wallet. For staking, the choice turns on three factors: operational complexity, how much of the reward reaches the investor and how quickly the investor can unstake their coins, a precursor to selling.
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