This article deals with the reason for people moving into microcap and nanocap reflection token plays in crypto. Especially then memecoins like PoorQuack, AwkwardTurtle, Catpepe and Shelon among others. It takes the current market conditions into account. We all know crypto has been in a downtrend almost ever since Coinbase became a publicly traded stock or since El Salvador entered Bitcoin.
- Why you probably should dollar cost average into memecoins
If the market over the last few months has shown us anything, it’s that DCAing (dollar cost averaging) is important. If you don’t know already, the DCA method involves buying some stock, but then holding back funds to buy more if it drops, thus bringing down the average cost per unit of your investment. You’ll often hear people talking about ‘buying the dips’, which is essential what DCAing does. With some of the projects I’m invested in dropping 90% of late, it’s a tactic I’ve used a lot. However, most of us don’t have a bottomless pit of money to keep doing this. So, if like me, you don’t have the funds to constantly DCA in the projects you like, earning a passive income is the next best thing.
- Passive income plays in memecoins
Passive income plays are vitally important, in my opinion, in down-trends or stagnant markets as you can increase your holdings without parting with more of your hard-earned money. A passive income can come from a node generating tokens daily, reflections or, most commonly, staking. Staking is feature that allows you to tie up, or lock in, your tokens of a certain project for a period of time. In return you accrue extra tokens, similar to interest in a traditional investment or savings account. Every staking project is different, but often, the longer you are happy to lock up your tokens, the better APR you get. Some smaller projects offer some incredible APRs, however often the really high rates of interest usually drop over time as more people enter the pools or staking rewards run dry.
- The risks of staking and DEFI
Like everything in crypto, staking has it risks. The main one being that locked up tokens often can’t be accessed (or sometimes only accessed with a penalty), which may not be ideal if you may want to sell those coins at any point. For example, if the value of a coin rockets, you may wish to take profits, but having them staked could make that difficult or impossible. Overall you need to weigh up the risk, but in this market I am personally happy to HODL my current investments, so staking to increase my token count is proving a great strategy.
- The difference between APR and APY
One other important notion to understand when discussing staking is the distinction between APR and APY. You may not be aware of the difference between the two or even realise there is a difference, but there is, and it can be huge. APR stands for ‘annual percentage rate’ i.e. the rate of interest you receive, annually, on your investment. You were probably aware of this already, but may not understand APY, or ‘annual percentage yield’. APY calculates the yearly interest, but factors in the 8th wonder of the world (Einstein’s words) – compounding. Compounding is the practice of periodically adding interest you’ve earned to the initial investment, thus having more money in the pot to benefit from the APR/rate of interest. Over time, this can make a very big difference.
- Why compounding matters
For example, lets say you stake $1000 for a year at 100% APR. You don’t need to be Einstein himself to work out you would accrue $1000 in interest over that timeframe. However, if you were to compound your earned interest once a week, you would instead accrue $1692. This disparency gets larger the more time passes, so worth considering when looking at staking options in crypto. I personally like projects where the staking pools have a ‘compound’ button for ease.
- Passive income through reflections
One final form of passive income I wanted to discuss is reflections. In crypto, ‘reflections’ are rewards you receive for simply holding a token. Projects that offer reflections use a proportion of taxes to buy tokens and distribute to holders. Sometimes these reflections can be native i.e. the project ‘gifts’ you more tokens in the coin you already hold or they can be external reflections. The latter is where the taxes are used to buy tokens from another project entirely and distribute them to holders. Personally, I like external reflection plays as I feel I’m growing a holding in 2 projects by investing in only one.
- Memecoins to consider
There are many memecoins on the market. Many more than you can ever hope to own and the opinions on them are quite different. While there are several things you want to know about any meme coin if you think reflections are a good thing you might want to choose a token where you are a familiar with the reward token.
$SHELON has the in memecoin terms bluechip $DOGE is the reward token.
$CPEPE has $KIBA as the reward.
The reward for holding $TURTLE is $MRI – Marshall Inu
Finally PoorQuack or $POOR has no reward from reflections, but use staking – a method that arguably suits the bear market better.
According to my sources $SHELON is considering turning off reflections and offer staking instead. Also $SHELON is discussing a migration towards native reflections to protect the chart.