Knowing whether to stake crypto or hold has become an important investing strategy in 2025.
As crypto is more widely adopted globally, many investors are wondering whether to invest for passive income or long-term growth.
Each approach has its rewards and risks…and tax implications!
In this guide, we’ll explain everything you should know about staking vs holding crypto in 2025.
We’ll compare potential returns, security risks, tax responsibilities, and which strategy is best for you as an investor.
Staking vs Holding Crypto
Staking vs Holding: What’s the Difference?
While both are popular ways to manage crypto, they serve different goals and appeal to different types of investors.
How Staking Works on Proof-of-Stake Networks
Staking is a feature of Proof-of-Stake (PoS) blockchains.
The Ethereum blockchain switched to this model, while Bitcoin uses the Proof-of-Work (PoW) system to validate transactions.
PoW systems use miners who solve complex “puzzles,” while PoS relies on validators who stake their crypto.
The trade-off of staking your crypto is that you earn rewards, similar to interest on a traditional savings account.
You don’t need to be an expert to stake your crypto since most people use staking pools.
Whether you use centralized platforms or DeFi protocols, staking is a crypto investing strategy used to create passive income from your crypto.
Examples of Popular PoS Networks
Holding Long-Term Crypto Investors
HODLing is a crypto philosophy for long-term investing.
It means that you buy cryptocurrency intending to hold it through market ups and downs.
The goal is that the crypto asset will be worth significantly more in the future.
Traditionally, HODLers don’t stake or trade actively.
Rather, they focus on buying more and holding crypto assets safely, waiting for long-term appreciation.
Material Bitcoin is a trusted physical wallet designed to securely store Bitcoin with no electronic parts, making it ideal for those with a “buy and hold” strategy.
How Much Can You Earn? Comparing Returns and Growth Potential
When choosing between staking vs holding crypto, you need to think about the potential return on investment.
Staking will give you regular payouts, while holding depends on long-term crypto price appreciation.
Typical Staking Yields by Platform and Coin
Staking rewards, also known as staking APY (annual percentage yield), vary on the blockchain, validator performance, and whether you’re using a centralized exchange or a decentralized platform.
Average Staking Yields
Centralized exchanges like Binance and Kraken offer auto-compounding rewards, but DeFi options usually return higher rewards, especially when using liquid staking protocols.
But you need to understand that staking yields are not guaranteed and can fluctuate based on network activity and validator performance.
Staking also introduces risks like slashing penalties or smart contract bugs.
Price Appreciation for Long-Term Holders
Long-term crypto holders often benefit from major price gains over time, especially when it comes to Bitcoin and Ethereum.
Historical Performance (2015–2024)
What Are the Risks of Staking vs Holding Crypto?
Both staking and holding have their own risks, but knowing them can help you make smarter decisions to protect yourself.
Staking Risks
- Slashing penalties is one of the most common risks. This happens when the validator you are using misbehaves or goes offline, causing part of your staked crypto to be lost.
- Smart contracts that are used in DeFi staking can be vulnerable to bugs.
- Centralized platforms run their own risks due to hacking.
- Uneducated investors staking their crypto without knowing the expectations and what it entails.
Luckily, there are some regulations being implemented, like within the UK, to protect stakers.
Safe Staking Checklist:
✅ Choose reputable validators or platforms
✅ Use liquid staking protocols with audits
✅ Don’t stake all your holdings
✅ Understand lock-up periods and unstaking delays
Holding Risks
- Holding means you ride out the market, which can be tough during bear markets or price swings.
Liquidity: Can You Access Your Crypto Anytime?
How quickly you can access your crypto depends on whether you’re staking or holding, and that can make a big difference when markets move fast.
Some staking requires you to lock your crypto.
For example, Ethereum staking has an unstaking delay of several days, called bonded staking.
With liquid staking, you get a token that represents your staked crypto, so you can trade or use it even while earning rewards.
Alternatively, if you’re holding your crypto, especially in a non-custodial wallet like Material Bitcoin, you can access it anytime.
No lock-ups, no wait times.
How Are Taxes Affected by Staking vs Holding Crypto?
In the U.S., the IRS treats staking and holding very differently.
Staking Tax Responsibilities
Staking rewards are taxed as income when you receive them, not when you sell them.
For example, if you earn $500 worth of crypto from staking in 2025, you’ll owe income tax on that amount.
- Many platforms issue Form 1099 to report your staking income to the IRS.
- Even if you don’t sell the rewards, they’re still taxable the moment you earn them.
- Later, if you sell the staked coins for a profit, you might also owe capital gains tax (double taxation).
Tax Advantages of Long-Term Holding Strategies
If you simply hold your crypto for a minimum of 12 months, any profits from selling are considered long-term capital gains.
This is taxed at a lower rate: 0%, 15%, or 20%, depending on your income.
- No income is reported while you hold; you’re only taxed when you sell.
- Using a cold wallet helps you track your crypto holdings.
Which Is Better for You?
The best approach will always depend on your goals, risk tolerance, and financial priorities, like whether you should be paying off debt before investing at all.
The Passive Earner
If you’re looking for steady returns and like the idea of earning rewards while you wait, staking is a good option for you.
The HODLer
If you believe in the long-term growth of assets like Bitcoin or Ethereum (which have been historically proven) and don’t mind waiting through market ups and downs, holding is a better choice.
Combing Both Strategies
The good news is, you don’t have to choose one or the other.
Many investors use a hybrid model.
For example, holding 70% in BTC and staking 30% in ETH for passive income.
Just make sure to think about your life stage, risk, and whether you might need liquidity.
And if you’re carrying high-interest debt, it may be wiser to pay that off first before locking up funds in crypto.
What Do The Experts Have To Say?
Many experts rely on platforms like EigenLayer, which allow restaking: staking the same crypto across multiple protocols for higher yields.
On the other hand, many analysts still preach HODLing, especially for Bitcoin.
Some even argue that staking is complete BS.
For many investors, a balanced approach can offer the best of both worlds.
Just make sure your crypto strategy fits your financial priorities, and always protect your crypto by using a reliable crypto wallet to avoid risks.
FAQs
Is staking crypto better than holding it?
- Staking can generate regular rewards, while holding has historically been shown to yield higher long-term gains. It depends on your investment goals.
Can I lose money by staking?
- Yes. Risks include slashing penalties, validator errors, and smart contract bugs, especially in DeFi.
Do I pay taxes on staked crypto?
- Yes. Staking rewards are taxed as income when received, even if not sold.
Is holding crypto safer?
- Generally, yes, especially when stored in a cold wallet.
Can I do both?
- Absolutely. Many investors stake part of their portfolio for income while holding the rest for long-term growth.
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