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Currently staked ETH is locked up in a smart contract that cannot be withdrawn from until the Shanghai upgrade comes around six to 12 months after the Merge goes through.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.
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