A much-anticipated update concerns Ethereum [ETH] and its significant transition to the Proof-of-Stake [PoS] space. The entire community has been keeping track of all the events leading up to the same. A few in the sector were anticipating yet another delay, even though the majority appeared to be expecting for a smooth changeover. Numerous of them have been indicating their support for the same amid this. Several platforms have halted ETH trading as the network gets ready for this eagerly anticipated update.
However, the price of Ether (ETH) may decouple from other crypto assets after the Merge, according to crypto analytics company Chainalysis, with staking yields perhaps driving significant institutional adoption.
According to a report released by Chainalysis on Wednesday, the future Ethereum upgrade would give institutional investors access to staking yields that are comparable to those of some securities, such as bonds and commodities, while also becoming much more environmentally friendly.
According to the paper, ETH staking is anticipated to provide stakers with an annual yield of between 10% and 15%, making it a “enticing bond alternative for institutional investors” given that treasury bond rates provide substantially less in comparison.
The report further stated,
“Ether’s price could decouple from other cryptocurrencies following The Merge, as its staking rewards will make it similar to an instrument like a bond or commodity with a carry premium.”
Has the number of Ethereum stakers been affected?
Chainalysis data shows that from fewer than 200 institutional ETH stakers in January 2021 to about 1,100 as of August this year, the number of institutional ETH stakers—those with $1 million or more in ETH staked—has “been gradually expanding.”
According to the company, if this figure rises more quickly after The Merge, this should support the claim that institutional investors “do indeed view Ethereum staking as a good yield-generating strategy.” The Chainalysis analysis predicts that after The Merge, ETH will attract more institutional and retail traders since the upcoming update will make staking a much more appealing investment instrument.
ETH that has been staked is currently trapped in a smart contract that cannot be released until the Shanghai upgrade, which will occur six to twelve months after the Merge. Due to the current lack of liquidity in the staked ETH market, some staking service providers offer synthetic assets that approximate the value of the staked Ether. The disadvantage, according to the firm, is that “such synthetics don’t always retain a 1:1 peg.”
Furthermore, this week, ConsenSys, the organisation formed by Joseph Lubin, a co-founder of Ethereum and the creator of the MetaMask wallet, also released a research examining the “effect of the Merge on Institutions.”