Dividends are recurring payments provided by businesses to stockholders in conventional finance. The Board of Directors determines the dividend amount, which is based on the company’s profits.
Dividends are rewards that crypto firms give out of their earnings, fees, or profits in the context of the cryptocurrency market.
Dividends on cryptocurrencies should not be confused with staking rewards or airdrops, particularly as the latter causes dilution. Despite the fact that cryptocurrency dividends frequently resemble staking incentives, they actually come from the project’s profits or revenues, which are typically generated by a centralized service like a trading platform. In the case of staking, block validators who upkeep the network are compensated with prizes. Few of the projects on this list refer to their benefits as dividends, which may cause confusion.
Should You Invest in Cryptocurrencies with Dividends?
Does it even make sense to think about dividend-paying coins? To begin with, there aren’t many cryptocurrencies that do dividend paying. Keep in mind that the value of the underlying token will eventually be your determining factor. (If the value of the token drops by 20% and you receive dividends worth 10%, you still lose 10%.)
Additionally, receiving dividends does not ensure that you will receive actual returns because they are given in the form of ETH or the native token, both of which have the potential to lose value and leave you with less money. On the other side, the varying price of dividends may cause your holdings to grow and eventually multiply in value.
Our strategy is to invest in high-quality crypto assets before considering those that only provide dividends.
The Final Remark
Unlike cryptocurrency investors, who get dividend payments in cryptocurrency tokens, traditional stock investors receive their dividend payments as cash or more shares of a company’s stock.
As previously said, there is a wide range in the value of crypto dividends. Cryptocurrency is famously volatile and may cause significant adjustments to your predicted crypto dividend payouts, even if the value of any share can fluctuate.