Are there any downsides to staking cryptos?

Bitcoin Talk and Cryptocurrencies
1

For those who are into crypto staking, what are the advantages and disadvantages?

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2

Hi,
Can you clarify what you mean by Crypto staking? Do you mean locking up a number of tokens of a given crypto currency for a fixed period with a promise of an interest rate payable at the end of the lock period?

3

Lockup period.
Theft of assets.
Centralization of our funds.
Questions about the taxability of staked assets, at least in the US is still vague.
Inability to quickly react to market price changes, depending on your staking service.

4

Really? I thought you’d only get taxed when you withdraw?

5

I believe US tax law is going the way of designating a taxable event at the time of receiving staking rewards, much like they for ETH 2.0 validators. In the case of individual traders who are locked up, the tax law isn’t exactly clear, but “when rewards are received” means a taxable event occurs when the rewards are received, regardless of whether you have access to them to sell/exchange/withdraw them.

6

That sounds crazy. I hope this doesn’t happen.

7

It may end up being just a year-end tax chore, to calculate your rewards received in the prior year, and paying taxes on those gains. Similar to bank account interest earned during the year. Still, would be far easier if the IRS just waited until you sold/exchanged/withdrew the funds.

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8

Well what if they collect taxes when crypto is mooning and then by the time you actually withdraw, Elon has already crashed all cryptos lol

9

And therein lies one of the major drawbacks of all things crypto… Elon.

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10

:joy: One does have to learn to deal with his tweeting if one wants to trade cryptos.

11

Yup, that’s just the reality of it lol

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