Songbird Staking Strategy and Returns

[RambeauTeasebox]

I thought I'd start a thread dedicated to strategies and results of Songbird staking. I've been collecting detailed data of my delegations and staking returns -- mostly for accounting/taxes -- but thought I'd share some general information and results. I'd be happy to hear about others' results and experiences.

I received SGB in several accounts and have been wrapping and delegating all of it except for a couple SGB in each account to cover transaction fees. After seeing the first FTSO provider returns data in Epoch 1, I've been distributing my delegations to a selection of the top 5-10 FTSOs. While I've paid attention to the weekly movements and most of my accounts delegate to the top few FTSOs, I'm also paying attention to the overall stats to choose those FTSOs with high returns but relatively low weekly volatility (i.e., those providers that have been staying in the top 10 or so from epoch to epoch). So far, I've changed one or two FTSO delegations per week -- but for Epoch 6 I made no changes, as all of my previous delegations landed in the top 7 or 8 both overall and for the previous week.

I've been claiming shortly after the end of each Epoch. Of my total claims, I've been restaking approx. 20%, letting my total delegated tokens appreciate by a few tenths of a percent each week. The rest I'm selling shortly after claiming, sending around 35% to savings for paying taxes and around 45% to cash for expenses and reinvestment in other things. While there has been a post-claim price dip each week, and perhaps holding for a few days would have been the best move to maximize fiat returns, I've been setting a limit order a few percent above the current market rate and have had orders filled within minutes or hours at prices I'm happy with. I think I'll basically stick to this 20-35-45 formula for Songbird and Flare, perhaps adjusting the restaking and cash profits percentages depending on the going fiat rates.

So far, it's a great return for little work. I'm sure the very high yields of the first few Epochs will decay and I speculate I'll see somewhere between a percent and half percent SGB weekly yields within another month or two, and perhaps sub-half percent in the longer term. Who knows what'll happen between more SGB releases from exchanges, more FTSOs coming on board, and staking/lock-ups for Flare Finance and other projects we may see in the future -- We may see yields really plummet or remain relatively high. Whatever happens, I suspect we'll see a similar pattern with Flare, though a better/quicker Flare token release from exchanges and the monthly disbursements could skew the current and near future Songbird pattern when Flare launches.

Finally, a graph of my returns, with relative amounts for fiat and total delegated SGB:

 

In summary, my weekly yield has decreased from around 2% to around 1.3-1.4% in recent weeks, my claim values in fiat have decreased to around 75-80% of the first weeks' totals, and my total SGB delegated has grown by just over 1% of the initial amount with my 20% restaking strategy.

Edited October 31, 2021 by RambeauTeasebox

[BillyOckham]

3 hours ago, RambeauTeasebox said:

In summary, my weekly yield has decreased from around 2% to around 1.3-1.4% in recent weeks, my claim values in fiat have decreased to around 75-80% of the first weeks' totals, and my total SGB delegated has grown by just over 1% of the initial amount with my 20% restaking strategy.

What an excellent post!   Very informative and interesting.  Thank you.

 

I’m taking a different strategy of wrapping all rewards asap to get the compounding effect.  Especially in these early higher yield days I think it’s the way to maximise gains and therefore my best bet.

To take profit now in my case would only make sense if I thought the price was going to fold.  If you have the time and inclination can you elaborate a bit on why you are doing differently?  Do you feel the price is a bubble or is it for some other reason?

Obviously everyone’s circumstances are different,  but I did think this was a clear strategy so to see you doing it differently makes me wonder if I’m missing something.  ( I often do….   )

 

[Fireballseven]

I’m with @BillyOckhamand compounding all rewards, it’s got me a  5.2% bigger stash than what I started with. 

[Tull]

5 hours ago, BillyOckham said:

I’m taking a different strategy of wrapping all rewards asap to get the compounding effect.  Especially in these early higher yield days I think it’s the way to maximise gains and therefore my best bet.

To take profit now in my case would only make sense if I thought the price was going to fold.  If you have the time and inclination can you elaborate a bit on why you are doing differently?  Do you feel the price is a bubble or is it for some other reason?

Obviously everyone’s circumstances are different,  but I did think this was a clear strategy so to see you doing it differently makes me wonder if I’m missing something.  ( I often do….   )

 

I think you're on the right track here. It's particularly important to build up your SGB through reinvesting rewards right now while the rate of return is the best it will ever be.

Then down the road, when the reward rate stabilizes, you will have a steady and predictable weekly rate of return you can use as you see best.

Selling part of your rewards right now will have a much more outsized harm to the size of that eventual stabilized weekly return than selling regularly later.    

[henne111]

12 hours ago, BillyOckham said:

Was für ein ausgezeichneter Beitrag! Sehr informativ und interessant. Dankeschön.

 

Ich verfolge eine andere Strategie, alle Belohnungen so schnell wie möglich einzupacken, um den zusammengesetzten Effekt zu erzielen. Besonders in diesen frühen Tagen mit höheren Erträgen denke ich, dass dies der Weg ist, um Gewinne zu maximieren und daher meine beste Wahl.

Jetzt Gewinne mitzunehmen würde in meinem Fall nur Sinn machen, wenn ich dachte, dass der Preis folden würde. Wenn Sie Zeit und Lust haben, können Sie kurz erläutern, warum Sie anders vorgehen? Glauben Sie, dass der Preis eine Blase ist oder hat es einen anderen Grund?

Natürlich sind die Umstände bei jedem anders, aber ich dachte, dies sei eine klare Strategie. Wenn ich sehe, dass Sie es anders machen, frage ich mich, ob ich etwas übersehe. (Das tue ich oft….    )

 

This is my strategy too!

[RambeauTeasebox]

19 hours ago, BillyOckham said:

I’m taking a different strategy of wrapping all rewards asap to get the compounding effect.  Especially in these early higher yield days I think it’s the way to maximise gains and therefore my best bet.

To take profit now in my case would only make sense if I thought the price was going to fold.  If you have the time and inclination can you elaborate a bit on why you are doing differently?  Do you feel the price is a bubble or is it for some other reason?

Obviously everyone’s circumstances are different,  but I did think this was a clear strategy so to see you doing it differently makes me wonder if I’m missing something.  ( I often do….   )

It's definitely the best strategy if you're just trying to compound gains -- I don't think you're missing anything there. Ideally, I'd like to compound all Songbird claims, but I'm choosing this way for a few different reasons.

First, crypto and some more traditional investments have been my main source of income for over three years now. Taking interest income from staking and DeFi investments means selling less from my core crypto and traditional investment portfolio and letting those investments appreciate. If I would let interest from staking compound then I would need money for living expenses by selling something else.

Second, my goal is to grow my Songbird and other staking investments by approximately the rate of inflation for those systems. With 10% SGB inflation per year right now, moving about 20% of my weekly claims -- and perhaps upping that percentage if/when my weekly yield dips -- should allow me to increase my delegated amount by 10%, give or take a few percent, by next year. If I can grow my SGB stack more or less with its inflation rate and continue to use it for income and (hopefully) let its value appreciate over time, I'm happy with that.

Third is taxes. In my jurisdiction (a moderate-rate state in the U.S.) with my income, right now I'm paying close to a 35% marginal rate and this interest income from staking is taxed at this income/short-term capital gains rate. Given my income sources, I'm very diligent about taxes and pay quarterly. The easiest, lowest-stress way to do that for me is to set aside a portion of the estimated tax burden when I sell something or intake interest/staking income. Since this is a weekly thing, and I'm selling a large portion of it for cash, I just take about 35% of the net gains from the claim and sales and stick it in a saving account to pay when tax time comes.

I realize not everyone has this sort of income and tax situation. And, if I were doing a compounding strategy, keeping everything in SGB, I might wait to sell some for taxes (and perhaps do tax loss harvesting) EOY. But, just like my income, the money for taxes has to come from somewhere. I can sell SGB and retain some cash for it now, or deal with it later by selling either some SGB or something else. But given that I'm selling this staking interest for income, it's just the easiest way to do it for me.

Lastly, I try to basically follow a balanced "total return" portfolio strategy and am also slowing moving large crypto gains to more traditional and less volatile investments -- including some Songbird gains. Instead of trying to maximize returns of a particular asset or few assets, which I did in the past, I'm now trying to build a more diversified portfolio of crypto and traditional investments. It's still pretty high risk and crypto-heavy, but I'm trying to find a good balance for my situation between risk, growth and income.

As you mentioned, by plowing all Songbird gains back into Songbird, you're getting incredible compounding -- probably doubling your SGB stack in a year, give or take -- but taking the risk that its value doesn't crash or decay over time, especially after Flare launches. And long-term I don't think that's a bad bet at all. Nor is it with much of the rest of crypto, IMO. I also realize the power of compounding but have more modest goals with my situation/strategy and am trying to balance it with other concerns. I'm just hedging my bets by taking a big portion of it in cash now for other things.

[LittleLordFauntleroy]

This is a great thread, thank you.

Personally, my current strategy is muttering curse words under my breath in the general direction of Luxembourg as I wait for Bitstamp to release my SGB.

In all seriousness, I'm going with the compounding strategy and holding for the long term.  I have the time and the career-based income to make that strategy work.

[Montoya]

On 10/31/2021 at 12:20 PM, RambeauTeasebox said:

I thought I'd start a thread dedicated to strategies and results of Songbird staking. I've been collecting detailed data of my delegations and staking returns -- mostly for accounting/taxes -- but thought I'd share some general information and results. I'd be happy to hear about others' results and experiences.

I received SGB in several accounts and have been wrapping and delegating all of it except for a couple SGB in each account to cover transaction fees. After seeing the first FTSO provider returns data in Epoch 1, I've been distributing my delegations to a selection of the top 5-10 FTSOs. While I've paid attention to the weekly movements and most of my accounts delegate to the top few FTSOs, I'm also paying attention to the overall stats to choose those FTSOs with high returns but relatively low weekly volatility (i.e., those providers that have been staying in the top 10 or so from epoch to epoch). So far, I've changed one or two FTSO delegations per week -- but for Epoch 6 I made no changes, as all of my previous delegations landed in the top 7 or 8 both overall and for the previous week.

I've been claiming shortly after the end of each Epoch. Of my total claims, I've been restaking approx. 20%, letting my total delegated tokens appreciate by a few tenths of a percent each week. The rest I'm selling shortly after claiming, sending around 35% to savings for paying taxes and around 45% to cash for expenses and reinvestment in other things. While there has been a post-claim price dip each week, and perhaps holding for a few days would have been the best move to maximize fiat returns, I've been setting a limit order a few percent above the current market rate and have had orders filled within minutes or hours at prices I'm happy with. I think I'll basically stick to this 20-35-45 formula for Songbird and Flare, perhaps adjusting the restaking and cash profits percentages depending on the going fiat rates.

So far, it's a great return for little work. I'm sure the very high yields of the first few Epochs will decay and I speculate I'll see somewhere between a percent and half percent SGB weekly yields within another month or two, and perhaps sub-half percent in the longer term. Who knows what'll happen between more SGB releases from exchanges, more FTSOs coming on board, and staking/lock-ups for Flare Finance and other projects we may see in the future -- We may see yields really plummet or remain relatively high. Whatever happens, I suspect we'll see a similar pattern with Flare, though a better/quicker Flare token release from exchanges and the monthly disbursements could skew the current and near future Songbird pattern when Flare launches.

Finally, a graph of my returns, with relative amounts for fiat and total delegated SGB:

 

In summary, my weekly yield has decreased from around 2% to around 1.3-1.4% in recent weeks, my claim values in fiat have decreased to around 75-80% of the first weeks' totals, and my total SGB delegated has grown by just over 1% of the initial amount with my 20% restaking strategy.

I see you have been setting aside a percent each week for paying taxes. Quite wise. Are you in the US? Has there been any consensus on XRPchat yet on how SGB weekly rewards from delegating will be treated by the IRS? Seems to me it would similar to dividends.

[RambeauTeasebox]

On 11/3/2021 at 4:02 PM, Montoya said:

I see you have been setting aside a percent each week for paying taxes. Quite wise. Are you in the US? Has there been any consensus on XRPchat yet on how SGB weekly rewards from delegating will be treated by the IRS? Seems to me it would similar to dividends.

My understanding is that in the U.S., staking rewards are subject to the same rates as income/short-term capital gains, and potentially the additional 3.8% NIIT, for Federal taxes. So yes, taxed like interest or ordinary dividends for the tax year in which they are claimed and at the USD market rate when they are claimed.

(Not financial or legal advice: Consult an accountant or attorney.)