Chainalysis suggests ETH could decouple from other cryptocurrencies
post Merge as its staking rewards could make it similar to bonds or
commodities.
Crypto analytics firm Chainalysis has suggested that the price of Ether (ETH) could decouple from other crypto assets post-Merge, with staking yields potentially driving strong institutional adoption.
In a Sept. 7 report, Chainalysis explained that
the upcoming Ethereum upgrade would introduce institutional investors
to staking yields similar to certain instruments such as bonds and
commodities, while also becoming much more eco-friendly.
The
report said ETH staking is expected to offer a 10-15% yield annually for
stakers, therefore making ETH an “enticing bond alternative for
institutional investors” considering that treasury bonds yields offer much less in comparison.
“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.”
According to
Chainalysis data, the number of institutional ETH stakers — those with
$1 million worth of ETH staked or more — has “been steadily increasing”
from under 200 as of January 2021 to around 1,100 as of August this
year.
The firm notes that if this number increases at a faster
rate following The Merge, this should confirm the hypothesis that
institutional investors “do indeed see Ethereum staking as a good
yield-generating strategy.”
The Chainalysis report also tips ETH
to draw in more retail and institutional traders after The Merge, as the
forthcoming upgrade will make staking a much more attractive investment
tool.
Currently staked ETH is locked up in a smart contract that
cannot be withdrawn from until the Shanghai upgrade comes around six to
12 months after the Merge goes through.
As such the staked ETH market is currently illiquid, resulting in some staking service providers
offering synthetic assets that represent the value of the staked Ether,
the drawback however is that “those synthetics don’t always maintain a
1:1 peg," argues the firm.
“The Shanghai upgrade [...] will allow
users to withdraw staked Ether at will, providing more liquidity for
stakers and making staking a more attractive proposition overall,” the
report reads.
Related: Binance US launches low-barrier Ethereum staking ahead of The Merge
Another
factor highlighted is that the Ethereum blockchain’s proof-of-stake
transition will see its energy consumption requirements drop by as much as 99% following the upgrade, as per the Ethereum Foundation.
“The
switch to PoS will also make Ethereum more eco-friendly, which could
make investors with sustainability commitments more comfortable with the
asset. This especially applies to institutional investors.”
ConsenSys,
the firm behind the MetaMask wallet and founded by Ethereum co-founder
Joseph Lubin, also published a similar report looking at the “impact of
the Merge on Institutions” this week.
The report echoes similar
sentiments regarding ETH staking rewards and environmental
sustainability attracting institutions, but also highlights the
importance of the PoS Ethereum chain “producing stronger security
guarantees for institutional investors” along with ETH’s potential to
become a deflationary asset:
“Reduced ETH issuance and
increased burns will systematically reduce ETH supply — putting
deflationary pressure on ETH, thereby alleviating institutional concerns
of token price dropping to zero, and increasing likelihood of an
increase in value.”
source link : https://cointelegraph.com/news/ether-price-could-decouple-from-other-crypto-post-merge-chainalysis
