Disclaimer – this is not advice. This is information only.

The Bear market is here (at the time of writing) for crypto, and this is the time to double down on learning about crypto and technology in my opinion.

You would be forgiven for putting investing to the back of your mind during periods of high inflation. There is a lot of fear, uncertainty and doubt (FUD) over what is happening in the markets. If you’ve been investing for a while, you’ll know that every market is cyclical. Try and zoom out and think big picture.

From experience, if you do the research and read the books, it will help to calm you down. Don’t do what I did after the financial crisis of 2008. I spent 10 years being negative about money and making questionable investing decisions. Do what I done when the markets crashed at the start of 2020. I stuck to the plan and continued to dollar cost average into my index fund.

My investing plan is long-term buy and hold with property, index investing and crypto. In terms of asset allocation, I have 80% of my net worth in property, 10% in my index fund and 10% in crypto.

Today’s post is going to be focusing on my crypto and in particular the 1% I put into very risky assets. That 1% is in CAKE and I have staked it for 1 year. This is to benefit from a very high interest return. If it goes well, it’s an excellent hedge against inflation. But if it goes wrong, I could lose it all. I’m aware of the risks and am happy to put 1% of my net worth into CAKE. High risk high reward.

What is CAKE?

Pancake Swap is a DEX (Decentralised Exchange) based on the Binance Smart Chain network. Pancake Swap has its own token and that is CAKE.

Pancake Swap is a newish platform and was launched in September 2020. The platform has had regular audits by blockchain security companies, such as Slowmist and Certik. This gives me peace of mind that the platform is safe to use. There are no guarantees and there may well be issues with platforms in the coming years but at this moment in time, I’ve had no issues using Pancake Swap.

The main application of Pancake Swap is that it is a trading platform. You can trade CAKE and many other assets.

Very simply, CAKE is Pancake Swap’s very own token like ETH is Ethereum’s token. Or how BNB is the Binance token. You can trade it if you’re a trader. Or you can stake it if you are an investor. Personally, I have X amount of CAKE that I stake. I am very much on the investor side of the fence.

Benefits of Pancake Swap

PancakeSwap is built on the Binance Smart Chain. The Binance Smart Chain (BSC) entered the market on September 01, 2020. As it’s built on BSC, the platform is capable of faster and cheaper transactions.

One of the current issues with the Ethereum network, is speed of transaction and cost. Uniswap is a leader in the DeFi (Decentralised finance) space. But it’s built on the Ethereum network and inherits some of Ethereum’s issues. Pancake Swap provides some much-needed competition to platforms like Uniswap as it rectifies some of the issues. It’s an excellent alternative to other leading platforms.

Although I believe strongly in Ethereum, it does have issues and I believe some healthy competition is a good thing. The fact is that most defi tokens are based on Ethereum. I like the fact that BSC has come along and taken away some of that market share. And I like not having to pay huge gas fees with everything I do in Crypto.

One of the main benefits that attracted me was the high yield when you stake your CAKE.

Staking crypto is a process that involves committing your crypto assets to support a blockchain network and confirm transactions. This usually happens via a “staking pool” which is similar to an interest earning savings account.

The reason your crypto earns rewards while staked is because the blockchain puts it to work. Crypto’s that allow staking use a “consensus mechanism” called POS (Proof of stake).

The current rate when you lock your tokens for 52 weeks is 111.20% APY (Annual Percentage Yield). And this is exactly what I’ve done. I’m ignoring the current bear market and have stopped looking at coinmarketcap to check on my tokens. I’m zooming out and looking at the big picture.

Putting your funds into smart contracts always has some level of risk, even for audited projects. The fact that multiple security firms are involved in auditing Pancake Swap gives it a higher rating than others. The fact that the project places a high emphasis on security is a massive benefit.

You can trade as I’ve mentioned and there are many other benefits. Like being able to purchase NFTs and there is even a lottery where you can win a significant amount of CAKE.

Staking my cake

It’s quite straight forward to stake your cake once you are set-up. But on the flip side, it can be quite difficult to set-up at first especially if you’re a beginner. To make things nice and easy, I’m going to give you a step-by-step guide of how I staked my cake from start to finish. 

STEP 1

Set-up a binance account and deposit your relevant fiat currency. Then swap your currency for BNB. You might have $1000 worth of BNB for example. 

STEP 2

You now need a wallet that supports Pancake Swap tokens. Metamask and Trust Wallet are supported by the Pancake Swap DEX (Decentralised Exchange). Metamask is my preferred choice. Create a Metamask account and you can get the app for your mobile or it will be a chrome extension on your laptop or desktop.

STEP 3

Add the smart chain network (BEP 20) to your Metamask so you can receive BNB. Once you have the smart chain network you will get a 42-digit public key that starts with 0x. This enables you to receive tokens that are on the smart chain network including BNB.

STEP 4

Go to your Binance account and access your wallet. Select BNB and select withdraw. Then you go back to Metamask and copy the public key for your smart chain (the 42-digit public key that starts with 0x). Go back to Binance and paste the address into the BNB withdraw box. Your basically withdrawing your BNB from Binance to your smart chain network in your Metamask wallet.

STEP 4

Connect your Metamask wallet to the Pancake Swap DApp. You’re on your laptop and you have 2 tabs open for Binance and Metamask. Open up another tab and type in pancake swap. Open up the pancake swap exchange and select connect wallet at the top of the page. This connects your Metamask wallet to the exchange.

STEP 5

Go to trade and this enables you to swap tokens. Swap your $1000 of BNB for CAKE. Now your almost ready to stake your cake. Go to your metamask wallet and you can import your CAKE tokens. Once you import the tokens using the relevant contract address your CAKE will appear in your MetamaskWallet in the smart chain network.

STEP 6

In the Pancake Swap exchange go to EARN and then select pools. You can stake CAKE and earn different tokens or stake your CAKE and earn more CAKE. I have staked my CAKE to earn more CAKE and I’ve locked this up for 52 weeks to benefit from the huge APY of 111.2%.

Sit back and forget about it….

I won’t be checking on my CAKE very often as it’s locked up for the next year. I’m taking a long-term view on my crypto and have even stopped looking at coinmarketcap.

If you stake $1000 you will hopefully get over $2000 back when your 52 weeks is up. That is if the price of CAKE remains the same. Remember it can go up and down depending on what’s happening with the market.

This is a risky way of investing as the price of CAKE is very volatile. But as I said, I’ve only invested 1% of my available liquidity into CAKE and I’m fully aware of the risks.

My feeling is that the crypto market as a whole will go up in value significantly over the next few years as adoption increases. And I feel that many crypto tokens will benefit and go up in value. This is only my opinion and it’s very important to do your research.

I’ve went high risk high reward with this one to try and hedge against inflation. If it works out it will be a bonus. If it doesn’t, I’ll fall back onto my properties, index fund and other crypto assets. That is the benefit of having a diversified portfolio.

This post is just to let you know how I’m investing 1% of my liquidity. And it’s just to offer some useful information if you’re interested in staking crypto and trying to hedge against inflation. We are all different and it’s so important to find a way of investing that is suitable for you and your financial goals. 

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