Ethereum Staking APY Drops to 3.5%
Over the years, one of the main attractions of Ethereum staking has been the high APY (Annual Percentage Yield). Stakers were generously rewarded for securing the network, leading to a significant increase in the percentage of ETH supply being staked. However, recently there has been a sharp decline in the APY, raising concerns about whether it is still worthwhile to stake ETH.
The Decrease in APY
In a surprising turn of events, the yearly APY for Ethereum stakers has plummeted to 3.5%. This drop was observed on the last reward day on October 15th, with stakers now receiving 3.502% rewards per annum, according to the BeaconChain website.
This marks a significant decrease from the 18% per annum recorded in 2020 when Ethereum staking first began. Since then, there has been a gradual decline in yearly rewards, although occasional surges have occurred.
Declining Rewards
For example, on May 5th, 2023, staking rewards reached 8.617% per annum with 4,229 ETH paid out to stakers. However, these levels have not been reached again, and instead, rewards have consistently declined.
The recent figures represent an almost 60% drop from the May figures and a 10% decrease in October alone. At the start of the month, the yearly APY stood at 3.89%, but it has since fallen.
Is Staking ETH Still Profitable?
Despite the reduced APY, staking ETH remains profitable. Unlike Bitcoin mining which requires high-computational machines, becoming an Ethereum validator does not have significant overhead costs. Liquid staking protocols have made it easier for users to participate in staking.
Although the APY is now 3.5%, stakers can still earn additional ETH on top of their staked amount, which they can withdraw as needed. Furthermore, even with the decreased APY, it is still higher than the interest rates offered by most banks worldwide.
Considerations and Potential Risks
However, it is essential to consider the potential risk of the price of ETH falling while your tokens are staked. This could result in a loss if the value of ETH decreases during the staking period. For example, those who staked their coins in 2021 when ETH was valued above $4,000 would be selling at a loss if they withdrew and sold their tokens now, even with the yearly APY factored in.
Hot Take: Is Ethereum Staking Still Worth It?
With the decline in APY for Ethereum staking, many are questioning whether it is still worth participating in this activity. While the rewards have significantly decreased from their peak levels, staking ETH can still be profitable due to additional earnings and higher returns compared to traditional banking options. However, it is crucial to consider the potential risks, such as a drop in the price of ETH during the staking period. Ultimately, whether Ethereum staking is worth it depends on your individual circumstances and risk tolerance.
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