JPMorgan Bullish on Ethereum Staking, Forecasts Growth
Analysts at the investment bank predict staking rewards will hit $40 billion by 2025.
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Ethereum’s shift to Proof-of-Stake could kickstart mainstream adoption and increase payouts, say two senior analysts at JPMorgan in a recent report.
JPMorgan Backs Ethereum Staking
JPMorgan thinks the cryptocurrency staking sector is poised for growth, according to a recent report.
In the report, two analysts explain how Ethereum’s planned move to Proof-of-Stake will increase adoption as institutions and retail investors take advantage of the high yields generated by staking. Ethereum is scheduled to complete “the merge” from Proof-of-Work to Proof-of-Stake after shipping its EIP-1559 update.
Staking across all cryptocurrencies generates an estimated $9 billion annually. The report predicts that this figure could increase to $20 billion following Ethereum’s move to Proof-of-Stake. A final prediction in the report puts total staking rewards at $40 billion by 2025.
Proof-of-Stake is a method of securing a network; users can stake their tokens to help validate transactions and maintain consensus on the blockchain. In return, those staking their tokens receive rewards.
According to JPMorgan, staking yields could be a key consideration for institutional investors. The report states:
“Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases cryptocurrencies pay a significant nominal and real yield.”
Additionally, the report states that declining volatility and a drop in power consumption will be important factors leading to mainstream adoption. JPMorgan has been showing clear interest in crypto over the last few months, recently recommending a 1% Bitcoin allocation in portfolios and indicating that it plans to offer crypto-related products to clients.
Ethereum 2.0, a set of updates that will see the network adopt Proof-of-Stake, has been anticipated for years. After numerous setbacks, it’s expected to ship in late 2021 or early 2022.
There’s currently over $12 billion locked up in the Ethereum 2.0 staking deposit contract, generating an APR of approximately 6.4%. However, ETH staked on the network cannot be withdrawn until the Ethereum 2.0 update goes live, making some people reluctant to stake their assets.
Disclosure: At the time of writing, the author of this feature owned BTC and ETH.