Chainalysis shows that ETH may collide with other cryptocurrencies post Merge as its staking rewards could make it similar to bonds or commodities.
Crypto analytics firm Chainalysis predicted that after the merger, the price of Ether (ETH) could be different from that of other cryptocurrencies., with staking yields potentially driving strong institutional adoption.
In a Sept. 7 report, Chainalysis said 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.
ETH shares are expected to yield 10-15% per year for stakers, therefore making ETH an “enticing bond alternative for institutional investors” much less compared to Treasury yields.
According to Chainalysis data, the number of institutional ETH shareholders — those who own ETH shares worth $1 million or more — has “been steadily increasing” from less than 200 in January 2021 to around 1,100 by August of this year.
The firm notes that if this number spikes after 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 predicts that ETH will attract 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Currently staked ETH is locked up in a smart contract that cannot be withdrawn until 6-12 months after the Shanghai upgrade.
The ETH stock market is currently illiquid, and as a result, some staking providers offer synthetic assets that represent the value of 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 stakes and making staking a more attractive proposition overall,” the report reads.
Another factor highlighted is that the Ethereum blockchain’s proof-of-stake transition will see its energy consumption requirements will reduce energy consumption by 99%following the upgrade, as per the Ethereum Foundation.
ConsenSys, the company behind the MetaMask wallet founded by Ethereum founder Joseph Lupin, about the “organizational impact of convergence.” The report echoes similar sentiments toward companies capitalizing on ETH’s interest rewards and environmental sustainability, highlighting the importance of the Ethereum PoS chain “creating strong security guarantees for institutional investors” and the:
ConsenSys, the firm behind the MetaMask wallet founded by Ethereum co-founder Joseph Lubin, made a similar statement this week “impact of the Merge on Institutions.”.
The report echoes similar sentiments regarding ETH staking rewards and environmental sustainability attracting institutions, highlighting the importance of the PoS Ethereum chain “producing stronger security guarantees for institutional investors” along with the potential for ETH to become a deflationary asset.
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