By
Steve Muchoki
April 16th, 2024
The financial market is witnessing a significant shift in investment options as crypto staking rewards outshines the payouts investors receive from companies in the S&P 500 index, despite strong growth in both markets.
According to Google Finance data, digital assets staking rewards has soard passed that of S&P 500 by a whopping 450%. The surge however, comes at a time when the S&P 500 has recorded its best first-quarter growth performance in five years, achieving a growth rate of 10.16% on March 31, 2024.
Crypto Staking Outperforms S&P 500 Dividends
Despite this strong growth for the first time in five years, the average dividend yield rate for the S&P 500 companies has decreased to 1.35%. The decline has brought the average dividend yield to its lowest level since the fourth quarter of 2021.
According to the Google Finance data, the 1.35% drop shows a difference of 0.23% from the all-time low of 1.1% which was recorded in the first quarter of 2000.
The difference in average dividend yields among the S&P 500 companies is also notable. Microsoft leads the pack with a dividend yield of 0.71%, followed by Apple at 0.56%, and Nvidia Corp at 0.02%.
This decline in dividend yields shows the attractiveness of crypto staking, which currently offers an average annual return of 6.08%, according to Staking Rewards.
Unlike the traditional finance companies, blockchain projects offer significantly higher staking rewards with Algorand (ALGO) leading the way among the top 100th cryptocurrencies that offer high yield on staking.
Users who lock up their digital assets holdings on the protocol receive a reward rate of 84.19%. The layer 1 blockchain protocol founded by Silvio Micali, a computer scientist and professor at the Massachusetts Institute of Technology (MIT) was followed by Cosmos (ATOM) which offers a staking reward of 17.17%.
Filecoin Offers Staking Reward of 16.34%
With Algorand and Cosmos taking up the first and second position amongst the top 100th crypto projects that offer users high yield on investments, Filecoin (FIL) is recognised as the third project with high staking rewards.
The Google Finance data shows the protocol offers users a 16.34% reward rate for staking their assets on the network.
However, despite the attractiveness of the staking rewards, high-yield staking comes with its own set of risks, particularly the locking up of assets, which could prevent investors from liquidating their holdings in case of a decline in value.
Asset Managers Embrace Crypto Staking
Meanwhile, the growing interest in crypto staking has caught the attention of institutional investors, with Grayscale Investments recently launching an investment fund aimed at exposing its clients to the income generated from staking crypto tokens.
The fund includes digital assets built on the Proof-of-Stake (PoS) mechanism such as Osmosis (OSMO), Solana (SOL), and Polkadot (DOT).
Other asset managers such as Ark Invest and Fidelity Investments are also looking to join the staking bandwagon to offer their customers the opportunity to tap into the burgeoning economy.
Both firms have submitted applications with the US Securities and Exchange Commission (SEC) seeking approval from authorities to stake Ethereum (ETH) as part of their investment offerings.