Dual investment staking has emerged as a novel DeFi approach to earn high interest on crypto in a short cycle (12 or 24 hours), while mitigating risks and guaranteeing interest returns. Learn how dual investment staking works, how its done and the risks in this guide.
What is Dual Investment Staking?
Dual investment staking is an interest-focused short term staking method, powered by DeFi smart contracts. It enables investors to earn interest on their digital asset holdings while benefiting from short-term market movements. This strategy involves staking (or locking) a cryptocurrency with the option to earn returns in either the same or a different asset. The payout at the end of the cycle depends on the price of the underlying asset.
Another way to express this is buy low or sell high. Read on to understand more.
How does Dual Investment work?
If you’re ready to try Dual Investment staking now, try our recommended partners ReHold or Nexo.
Dual investments start with a user locking a single cryptocurrency for a fixed period (let’s use 24 hours in our example, and we pick BTC to deposit). The investor then chooses a pair (let’s pick ETH). If, after the term, the market price of the single cryptocurrency is above or below the target price, the investor receives returns in either the staked cryptocurrency or the pair.
No matter how the price moves, you will always earn interest at the end of the term, however, the crypto (one of the selected pair) you receive, is dependent on the price.
You pick 1 BTC to Dual Investment Stake for 24 hours.
Your selected pair is ETH.
- APY: 100% annual
- Entry price: $40,000 = 1 BTC
After 24 hours, two outcomes are possible:
- Sell High: BTC price is higher than the close price (BTC >= $40,000).
- You receive the value of your BTC in ETH + interest.
- Buy Low: BTC price is less than close price (BTC < $40,000).
- You receive your initial BTC + interest.
Risk Scenarios
Scenario 1: Rising Market with BTC deposit
Let’s say you deposit BTC (with ETH) as a dual investment. In 24 hours, BTC rises significantly. In the end, you receive ETH + interest, losing out on the significant gains BTC had in that 24 hour window (opportunity cost).
Scenario 2: Falling Market with USDT Stablecoin deposit
Let’s say you deposit USDT (with BTC) as a dual investment. In 24 hours, BTC drops significantly. You end up receiving BTC + interest, but BTC is valued lower, leading to a loss as you’ve bought BTC with USDT at a higher cost-basis than the current price.
Benefits of Dual Investment Staking
- Enhanced Returns: Dual investment staking often offers extremely high interest rates compared to traditional staking, as it combines elements of staking and options trading.
- Diversification: This strategy allows for diversification within the crypto asset portfolio, reducing the risk associated with holding a single cryptocurrency.
- No Direct Trading Required: Investors can gain exposure to trading-like returns without actively participating in the market.
Risks and Considerations
- Market Volatility: The crypto market is known for its volatility, which can significantly impact returns.
- Complexity: Understanding the nuances of dual investment staking requires a higher level of financial knowledge.
- Counterparty Risk: There’s always a risk associated with the platform or service providing the dual investment staking product.
Who Should Consider Dual Investment Staking?
This investment strategy is best suited for advanced investors who have a solid understanding of the cryptocurrency market and its inherent risks. It is particularly appealing to those looking for higher returns and willing to accept the higher risks.
Dual investment stakers should also trade assets they are interested in holding. Any pair trading you do should be focused on earning either crypto at the end of the contract, leaving you with desirable assets. Picking a pair of another coin you aren’t interested in could leave you with assets you need to trade, potentially at a loss.
If you’re ready to try Dual Investment staking now, try our recommended partners ReHold or Nexo.
Dual investment staking represents an innovative and potentially lucrative approach for earning crypto interest. However, it is not without its complexities and risks. As with any investment, due diligence, comprehensive understanding, and risk assessment are vital before diving in.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a financial advisor before making investment decisions. DeFi protocols, while potentially audited, are not fully secure. Complete loss of capital are common.
