Chainalysis proposes that ETH could become separable from other cryptocurrencies after the merger. Crypto analytics firm Chainalysis has suggested that the price of Ether (ETH) could become separable from other crypto assets after the merger, with the potential to lead to strong institutional adoption of returns. In a Sept. 7 report, Chainalysis reported that Ethereum's upcoming update would offer institutional investors similar returns to certain instruments like bonds and commodities, while being more environmentally friendly. Given the much lower yields on government bonds, ETH staking is expected to deliver 10-15% annual returns for stakers, according to the report, making ETH an “attractive alternative to bonds for institutional investors. It's a great choice.
“Ether’s price could be decoupled from other cryptocurrencies after the merge as its staking rewards look like bond-like commodities and commodities with premium carry.”
According to Chainalysis data, the number of his ETH stackers, an institutional investor holding more than $1 million in ETH stock, has gone from under 200 in January 2021 to about 1,100 in August this year. It is "steadily increasing" to people. The company notes that if this number increases faster after the merger, it should confirm the hypothesis that institutional investors "already see investing in Ethereum as a good strategy for returns."
The Chainalysis report also advises ETH to attract more retail and institutional traders after The Merge, as the upcoming strike upgrade will make it a more attractive investment vehicle.
ETH attached to a smart contract is currently held and cannot be revoked until the Shanghai upgrade occurs approximately 6-12 months after the merger is completed. Therefore, the stacked ETH market is currently illiquid, which has led some staking providers to offer synthetic assets that represent the value of stacked Ether. However, the downside is that “these synthetic assets do not always maintain a 1:1 correlation,” says Feste.
“The Shanghai update [...] will allow users to withdraw Ether at will, providing players with more liquidity and making betting more attractive overall,” the report said. Another factor that has been highlighted is that, according to the Ethereum Foundation, moving the Proof of Stake blockchain to Ethereum will see power consumption requirements drop by up to 99% after the upgrade.
The move to PoS also makes Ethereum more environmentally friendly, which could make investors with sustainability commitments more comfortable with the asset. This is especially true for institutional investors. "
ConsenSys, founded by Ethereum co-founder Joseph Rubin behind the MetaMask wallet, released a similar report this week examining “the impact of the merger on institutions.”
While the report reports that Ethereum's staking rewards and environmental sustainability reflect a similar sentiment attracting institutions, this, along with the potential for Ethereum to become a deflationary asset, "creates a strong cushion of security for institutional investors. PoS Ethereum Chain also highlights the importance of
A decrease in the issuance of ETH and an increase in the buns systematically reduce the supply of ETH. We will ease the worries.
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