CoinDesk
Investors staking cryptocurrencies such as Ethereum's ether face different deductions from their rewards depending on where they hold their assets. Exchanges commonly retain 25% to 35% of rewards, compared with 5% to 15% for self-custody holders using a staking service and 5% to 25% for staking exchange-traded products, according to John Keller of Morgan Stanley Investment Management.
On $100,000 staked at a 2.5% gross annual rate, a 5% share retained leaves an investor about $2,375, while a 25% to 35% share leaves roughly $1,625 to $1,875. The ETP example assumes all of the fund's cryptocurrency is staked; unstaked holdings earn no staking reward.
ETP shares can be sold without waiting for the underlying coins to be unstaked, while direct holders generally must unstake before selling. Self-custody also requires investors to secure keys and monitor providers. Liquid staking adds smart contract and liquidity risks, while validator selection and monitoring matter across the different approaches.
Frequently asked questions
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How much of staking rewards do exchanges typically retain?
Exchanges commonly retain 25% to 35% of staking rewards, according to John Keller of Morgan Stanley Investment Management.
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How do staking service fees compare for self-custody and ETPs?
Self-custody holders using a staking service typically give up 5% to 15% of rewards. Staking ETP sponsors typically retain 5% to 25%.
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Why does the share of an ETP's assets that is staked matter?
Any cryptocurrency in the fund that is not staked earns no staking reward. The percentage staked can vary by issuer and over time.
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Can an ETP investor sell shares without waiting for unstaking?
Yes. ETP shares can be sold without waiting for the underlying coins to be unstaked. Direct holders generally need to unstake their coins before selling them.
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What additional risks does liquid staking introduce?
Liquid staking adds smart contract and liquidity risks. Investors should also distinguish between selling a liquid token and withdrawing the underlying staked assets.
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