Winter is coming! Here are 5 ways to survive a crypto bear market

February 5, 2022 Coin Telegraph

Airdrop

The multi-month pullback in crypto prices are giving veteran investors flashbacks of the 2018 crypto winter. Here are 5 things investors can do to survive a bear market.

The cryptocurrency market has an interesting way of catching even the most seasoned veterans off guard as each bull and bear market initially shows similarities to previous cycles only to veer off in an unexpected direction and wipe out the fortunes of newly minted crypto millionaires.

This was the case with the weak close of 2021 which completely went against the bullish $100,000 BTC price estimates that crypto analysts and influencers were peddling nonstop.

Currently, Bitcoin price is more than 50% away from its $69,000 all-time high and altcoins have fared worse, with many down more than 60% in the last 2 months. In times like these, traders need to regroup and re-evaluate their investment strategy, rather than just buying every price dip.

Here are five strategies traders can use to survive an unexpected crypto winter and retain as much value in one’s portfolio as possible.

Reduce exposure to highly volatile altcoins

Once a widespread market downturn commences, the first step to take is to reevaluate current positions and reduce exposure to the most volatile assets.

Oftentimes these are new projects that have come out of the trending sectors of the crypto market such as meme coins, NFTs or rebase projects like Wonderland (TIME), because many of the token holders are new to the community and not long term investor like the user bases for more established projects.

$TIME to pack it up. pic.twitter.com/hJI3jB6eU0
— humble defi farmer (@PaikCapital) January 25, 2022

A good way to begin the evaluation process is by looking at a project’s GitHub account to see the level of activity and the number of developers dedicated to building out the protocol.

If there is hardly any development despite flashy marketing gimmicks and big promises, the project may be one an investor should cut when the market begins to lose momentum.

Traders could then put these funds in stablecoins that can be staked to earn yield or buy future market dips.

Dollar-cost averaging

Dollar-cost averaging (DCA) is the process of buying an asset in tranches over time to average out the price paid and account for volatility-induced changes in price.

There's a reason that bitcoiners have the most aggressive dollar-cost-averaging community.

They correctly identify work and true scarcity, and understand it. It's hard to rival that force and utility of something that *can't* be increased in supply.
— Lyn Alden (@LynAldenContact) January 31, 2022

While DCA strategy is a good way to increase exposure to fundamentally sound projects over time, it is usually best to wait until after the dust has settled somewhat and a period of consolidation has commenced.

The focus of dollar-cost averaging should be on projects that have active development, engaged communities and a roadmap that lays out how the project will continue to grow and remain viable in the future.

Staking

Staking is perhaps the simplest way to increase the value of a portfolio long-term and it removes the pressure of obsessing over daily price fluctuations since the staked asset is continuing to accrue tokens.

Most layer-one protocols offer the ability to stake their native token on the network to earn a yield, including Solana, Cardano, Polygon and Avalanche.

⚡️Top Projects by Total Staked Value
25 January 2022$SOL $ADA $ETH $LUNA $AVAX $DOT $BNB $ATOM $ICP $NEAR $MATIC $FTM $XTZ $ALGO $CAKE pic.twitter.com/X9IgsonWKr
— CryptoDep (@Crypto_Dep) January 25, 2022

Ether holders can also stake their tokens on the beacon chain for Eth2, but it’s important to note that staking rewards will not be able to be claimed until Eth2 is fully launched.

There are many other staking options out there from gaming protocols like Axie Infinity and Illuvium to NFT marketplaces like LooksRare, so once a deep dive has been made and fundamentally sound projects are chosen, staking becomes a matter of setting it and forgetting it.

Find projects with growing ecosystems and perks

Projects that help token holders earn via staking, liquid staking, borrowing and airdrops are also worth considering when the market turns bearish.

Staking is the simplest form of this as the number of tokens increases over time, but other options include token launchpads, NFT marketplaces and protocols known for offering airdrops to community members.

One example of a protocol where early adopters are being rewarded is the Cosmos (ATOM) network and its growing community of projects connected via the Interblockchain Communication Protocol (IBC).

Best site to keep track of @Cosmos Airdrops https://t.co/XzOOIb5TAG

Builders: submit your upcoming airdrop on that site if you want to increase awareness.@CosmosUplink pic.twitter.com/IPoDqZ8ymp
— Cryptocito | YouTuber ⚛️ (@Cryptocito) January 26, 2022

ATOM stakers and those who have engaged with the Osmosis (OSMO) decentralized exchange have been rewarded with a long list of airdrops from projects launching within the ecosystem as a way to help bootstrap activity within their communities.

Invest in yourself

One of the most personally beneficial things an investor can do during a down market is to invest in themselves by learning something new.

Not only will this help investors to avoid the urge to sell and miss out on future gains, but it can also lead to new avenues to build wealth.

Level up and invest in yourself:

- read more books
- work out well more often
- spend time with family and friends
- take a course and learn a new skill
- invest in a hobby to share w/others

You get out of life what you put into it.

Find your values and invest in them.
— Wealthy Tree (@WealthyTree) February 1, 2022

Despite the market downturn, cryptocurrencies continue to advance along the path to mass adoption and the number of jobs in the blockchain sector is only going to increase moving forward.

Whether it’s learning to program in Solidity, experimenting with graphic and digital design to create a new line of NFTs or just doing research to gain a deeper understanding of the various sectors of the market.

Ultimately, the key to surviving a bear market is staying positive and being patient.

Want more information about trading and investing in crypto markets?

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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

PoS validator turns down IRS tax refund offer, pushes for clear policy on staking taxation

February 3, 2022 Coin Telegraph

Coin Telegraph

The Tezos validator who took the IRS to court argues that staking rewards should be treated as created property rather than income.

A United States couple suing the federal tax agency over Tezos (XTZ) staking rewards taxation chose to forego a tactical victory and engage in a court battle that could eventually result in policy change.

Joshua and Jessica Jarrett, who run a node on the Tezos network (thus “baking” new blocks, in the ecosystem’s lingo), have sued the Internal Revenue Service (IRS) over the taxes paid on the XTZ tokens created in 2019. The Jarretts filed a refund claim on upwards of $3,000 paid on the tokens, which the IRS ignored.

The fundamental point of contention underlying the lawsuit is the classification of staking rewards as either taxable income or created property, which is not taxed until it is sold. The Tezos bakers argue that earning coins by staking is akin to baking a cake or writing a book, and thus these coins should not be treated as taxable income.

On Feb. 3, Joshua Jarrett released a statement that the U.S. Government has offered a refund of the taxes in question as part of the settlement. Jarett said that “At first glance, this seemed like great news,” but he later realized that without a court ruling, there would be nothing to prevent the tax service from taxing his staking rewards again. Jarrett said:

A year and a half into this process, the government didn’t want to defend the position that the tokens I created through staking were taxable income. […] I need a better answer. So I refused the government’s offer to pay me a refund.

Jarrett’s statement further indicates that his ultimate goal is to get the IRS to clarify its position on taxing staking and block rewards “for both Proof of Stake and Proof of Work” systems. He maintained that, while no guidance exists on this matter, the tax authority’s concession in his case could be interpreted as support for the position that staking rewards are not taxable income.

Reid Yager, former staffer at industry advocacy group Proof of Stake Alliance (POSA), stated:

The decision by the IRS and DOJ to offer a refund without taking steps to correct poor policy places American businesses and American innovation at risk.

A subsequent court ruling on whether staking rewards are taxable income or not will likely become a critical juncture for the PoS industry.

Report crowns Solana for using least energy per transaction, but there’s a catch

February 3, 2022 Coin Telegraph

Coin Telegraph

Despite Solana’s low power consumption per transaction, the PoS network still uses much energy overall compared to other PoS protocols.

Solana (SOL), one of the most active proof-of-stake (PoS) blockchains, appears to be a PoS protocol consuming the lowest amount of electricity per transaction, according to a new report.

The Crypto Carbon Ratings Institute (CCRI), a research startup focused on the environmental impact of cryptocurrencies, released on Wednesday a new report calculating the electricity consumption and carbon footprint of major PoS blockchains.

The CCRI specifically analyzed PoS networks including Cardano, Solana, Polkadot, Avalanche, Algorand and Tezos.

According to the CCRI’s findings, the Solana blockchain consumed 0.166 watt-hours (Wh) of electricity per transaction within the study, becoming the most energy-efficient PoS protocol in terms of energy used per transaction among the six analyzed networks.

Cardano, a PoS network that has the biggest market capitalization at the time of writing, consumes the biggest amount of electricity per transaction, which is 52 Wh, according to the report. However, when it comes to a "per-node" comparison, Cardano uses the least amount of electricity per node, the CCRI found.

*Electricity consumption per transaction for PoS systems and Visa. Source: CCRI*

“This metric depends on the amount of transactions taking place on the respective blockchain, also the overall electricity consumption per transaction further depends on the number of nodes connected to the respective network. Generally, these numbers are expected to go down with an increase in the transaction rate, regardless which blockchain is in use,” the study reads.

Despite Solana’s low energy consumption per transaction, the PoS protocol still consumes a lot of energy due to the network’s massive usage, compared to other PoS networks. According to the CCRI’s study, the Solana blockchain emits 934 tonnes of carbon dioxide equivalent per year, compared to 33 tonnes for Polkadot.

At the time of writing, Solana is the most-traded PoS protocol, with $2.9 billion in daily trading volumes, while Polkadot has about $900,000 in daily trading volumes, according to data from CoinGecko.

*Yearly carbon footprint of PoS networks compared to a roundtrip flight in business class. Source: CCRI*

Unlike major blockchain networks like Bitcoin and Ethereum, which use mining operations to confirm transactions based on a proof-of-work (PoW) mechanism, PoS blockchains rely on users simply locking up tokens. As PoS blockchains do not need extra energy from miners in order to validate transactions, they are considered as being more energy efficient.

As previously reported, many global financial regulators have used PoW’s high energy consumption rates as yet another reason to ban the use of cryptocurrencies like BTC. They would probably also want to ban global banks as the traditional banking system was reportedly consuming twice more energy than the entire Bitcoin network as of March 2021.

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Dogecoin Foundation Says It’s Working With Ethereum’s Vitalik Buterin on a Staking Concept

December 25, 2021 Bitcoin.com

Dogecoin Foundation works with Ethereum co-founder on DOGE staking

December 24, 2021 Coin Telegraph

Coin Telegraph

The new DOGE PoS version aims to allow anyone to get rewards for their contribution to running the network.

The Dogecoin Foundation, a non-profit organization behind the meme-based cryptocurrency Dogecoin (DOGE), is working on a staking mechanism in collaboration with Ethereum co-founder Vitalik Buterin.

The Foundation on Thursday released its Dogecoin Trailmap or a “dog-walk” that the Dogecoin Foundation is committed to exploring and which it believes would contribute to Dogecoin’s success.

As part of the trailmap, the Dogecoin Foundation is working with Buterin on building a “uniquely Doge proposal” for a “community staking” version of proof-of-stake (PoS).

Such a version would allow all Dogecoin users to stake their DOGE and get extra tokens for supporting the network, the Dogecoin Foundation said:

“[The PoS version] will allow everyone, not just the big players to participate in a way that rewards them for their contribution to running the network, and at the same time gives back to the whole community through charitable causes.”

As previously reported by Cointelegraph, the Dogecoin Foundation reestablished its project in August 2021 after six years of almost zero media activity. As part of the new team, the foundation listed advisory board members including Buterin, Dogecoin co-founder Billy Markus and Dogecoin core developer Max Keller. Tesla CEO and major DOGE fan Elon Musk’s interests were reportedly set to be represented by Neuralink CEO Jared Birchall.

“As you can imagine, setting off on such an adventure is not a small feat and we are still just getting started. We already have some influential friends on our side and a growing group of people who are getting ready to contribute development time to these open-source projects,” the latest post from the foundation reads.

Dogecoin was founded in 2014 by software engineers Billy Markus and Jackson Palmer, who created DOGE’s payment system with an idea of a “joke.” The Dogecoin Foundation ceased to be active shortly after its founders left the project.

Crypto exchange Kraken acquires non-custodial staking platform Staked

December 21, 2021 Coin Telegraph

Business

Kraken said its staking business had grown by more than 950% since the beginning of the year to reach $16 billion in November.

Major cryptocurrency exchange Kraken has announced that it purchased blockchain infrastructure company and investment manager Staked for an undisclosed amount.

In a Tuesday announcement, Kraken — the crypto exchange aiming for a $10 billion valuation — said it had added Staked to its portfolio of yield products following the acquisition. The company described the Staked deal as “one of the largest crypto industry acquisitions to date” but did not disclose the amount.

According to Kraken CEO Jesse Powell, Staked users will have access to Kraken’s portfolio of yield products. Staked CEO Tim Ogilvie cited the exchange’s “commitment to supporting proof-of-stake networks” as well its track record on customer experience and security in its decision to move forward with the deal.

As we gear up for 2022, Kraken is celebrating its continued growth and success with the expansion of its ‘staking’ tentacle through an acquisition of Staked.

Check out our blog for more details about this exciting deal! https://t.co/26WfBKqO3F pic.twitter.com/WP9pjjkueN
— Kraken Exchange (@krakenfx) December 21, 2021

The crypto exchange said its staking business had grown by more than 950% since the beginning of the year to reach $16 billion in November. This may have been driven in part by vehicles in which to invest in Ether (ETH) and earn staking rewards.

Kraken has acquired several companies over the past few years related to its staking business and otherwise. Since 2017, the firm has purchased accounting and portfolio reconciliation service provider Interchange, Australian crypto exchange Bit Trade, and Cryptowatch, among others. Powell has also hinted that the exchange could go public before the end of 2022.

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Proof-of-Stake