Staking Crypto: The High-Risk Dividend Play Luring 35% Of Digital-Asset Investors

Staking cryptocurrency has become the high-risk version of a dividend play, with 35% of digital-asset investors saying in EY's March 2025 survey that yield generation keeps them in the game. 

Unlike dividend stocks or bonds, staking returns come with liquidity limits and lock-ups that prevent investors from selling at preferred prices.

Some higher-yielding cryptocurrencies, like five-year-old blockchain network Polkadot (CRYPTO: DOT),  have seen prices drop roughly 30% over the past year — wiping out much of the staking income. DOT currently offers about 7.6% annualized yield.

"Staking has emerged as the Web3 equivalent of dividends, but with unique trade-offs investors need to recognize," said Alex Hung, Head of Operations at cryptocurrency exchange BTCC, founded in Shanghai in 2011. "On one hand, it provides a predictable yield mechanism that can encourage long-term holding and stability within crypto ecosystems. On the other, liquidity constraints, technical risks, and evolving regulatory interpretations make it far less straightforward than buying a dividend stock or a bond. For retail investors, the key is to weigh the potential yield against the heightened uncertainty, rather than viewing staking as a guaranteed income stream."

The U.S. Securities and Exchange Commission's Division of Corporation Finance issued a staff statement on August 5, 2025, addressing digital assets liquid staking, in particular. Liquid staking means you can buy and sell when you want as opposed to having to lock-in. This August note was a follow-up to its May 29, 2025 Protocol Staking Statement.

Legal risks remain if token sellers introduce yield guarantees or additional perks. This evolving landscape makes the staking landscape uncertain. 

"I think staking is still a massive risk for retail investors," said Naeem Aslam, CIO of Zaye Capital Markets in London. "Even professional investors remain uncertain about the safety and liquidity of these assets." In other words, the yield looks nice, but the underlying asset may become worthless. What's 100% of nothing? Exactly.

Still, this is a market that continues to evolve, however.  We are in the early stages of cryptocurrency as a bonafide asset class.

Blockchain networks will offer yield often for certain staking periods. To get that yield, investors need to lock-up and stake their tokens to the network over a specified time frame before selling. Staking can take many forms, but is usually either active and passive. Active staking means locking tokens to a network for the purpose of actively participating in the network. Active participants may validate transactions and create new blocks to earn token rewards. This is more for developers.

Passive staking is for investors of all types. They agree not to sell for a period of time to earn yield. 

The fintech world has developed a few different types of staking, with the simplest ones to understand being exchange-based staking and liquid staking. Ethereum (CRYPTO: ETH) is the leading example of a liquid staking ecosystem, thanks to protocols like Lido (CRYPTO: LDO), Rocket Pool (CRYPTO: RPL), and Coinbase Wrapped Staked ETH (CRYPTO: CBETH).

Estimated Yields and 2025 Performance

Data as of mid-October 2025; estimates from StakingRewards and major exchange dashboards. Actual rates vary by provider.

A $10,000 investment in Cosmos staked at 15% would generate about $1,500 in annual yield, but with the token down roughly 50%, the holding's value would be near $5,000 — a net loss around $3,500 after rewards.

Staking: Risk & Reward

Because token prices can swing wildly, staking income can vanish quickly in a bear market. Once prices drop, many alt-coins take years — if ever — to recover.

For investors who want cash immediately, unstaking tokens can come with exit delay periods, making it harder to time a sale or quickly allocate capital to something else. Some firms will borrow against staked assets, adding to the risk. The bigger the whale's use of leverage, the worse it can be for the entire market if they make a terrible trade.

But as digital assets become a bigger part of an investment portfolio, asset managers are seeking regulatory approval to build crypto ETFs that pay staking yield. In September, REX Shares and Osprey funds announced the REX-Osprey ETH + Staking ETF (BATS:ESK), the first 1940 Act U.S.-listed ETF to give investors exposure to staked Ethereum. Yield is paid monthly.

Greg King, CEO of REX Financial said ESK "continues our work of introducing crypto staking through the ETF structure." For a while, it looked like the SEC was not going to allow this ETF to go forward. Its approval suggests regulators are warming to staking exposure while tightening safeguards against familiar crypto hazards like lock-ups, protocol bugs, regulatory ambiguity, and slashing — the automatic loss of tokens when validators break network rules.

Staking is more than a way to earn yield—it is the foundation of security and economic design in modern blockchains, Grayscale's vice president Yubo Li wrote in a report dated Oct. 2. When participants stake, they commit capital that protects the network, while earning variable returns linked to network activity.

"Staking generates predictable, yield-like returns that resemble fixed income in traditional markets," Li wrote. "Unlike contractual yield from bonds or other fixed income instruments, staking rewards are protocol-driven, variable, and contingent on network factors such as validator performance, token inflation schedules, and governance decisions. These rewards serve as incentives for validators to secure the network and promote its ongoing usage."

Li predicted that staking will be equal to cryptocurrency payment programs and clearing systems as "one of the essential pillars" of this new financial infrastructure. "Institutional interest in crypto investments may rise," he predicted, citing the increased prevalence of staking as another reason why.

Disclosure: The author is an investor in Polkadot, Ethereum and Solana.

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