Make Better Decisions Staking Cardano (ADA): Lessons from On-Chain Data

Feb 5

Read this to improve your Cardano staking decisions.

This is only an excerpt. Read the complete article for free: https://www.stakingrewards.com/journal/make-better-decisions-staking-cardano-lessons-from-on-chain-data/

Improve Staking Decisions with Cardano Staking Flow Behavior

Going back to Cardano staking flows in the last two quarters, we notice a few trends that might help ADA delegators make better decisions.

Look out for abrupt staking inflows when the price declines from a recent local top. The behavior occurred three times during significant price movements in the last two quarters. ADA investors should be patient when abrupt inflows occur as local high prices decline.

Another staking flow behavior within ADA focuses on consecutive days of continued flows. Several consecutive days of outflows, while the price is moving in the same direction, may signal a more significant move in the same direction. Daily flows must be a similar size, and counter flows must be nonexistent or minimal. ADA investors should look for continued flows in the same direction along with the price to anticipate future price direction.

Reward Rates and Validator Selection

ADA reward and inflation rates are nearly identical, 3.60% and 3.40%, respectively. Commission rates taken by validators on rewards have also increased from 6.3% to 7.05% on all rewards. On average, current ADA real rate returns are slightly negative at -0.17%. Learn more about the ADA rewards system and calculate staking scenarios with the Cardano staking calculator.

Breaking down the rates further, we notice significant differences depending on the staking method and chosen validator. Surprisingly delegators aren’t selecting validators based on reward rates and commission fees. There's little correlation with the number of unique wallets, lower commission fees, or higher rewards. This begs the question on how delegators go about their staking decision process. Either delegators lack information or value other factors beyond rates and fees. This perhaps involves ease of use, other features, trust, and many other factors. Further insights into the validator selection process can be found in our State of Staking 2022 report.