JPMorgan report: The launch of Ethereum 2.0 next year will cause staking pay-outs to balloon to $40 billion by 2025
The launch of energy-efficient Ethereum 2.0 will popularize Proof-of-Stake (PoS) and make staking a more attractive source of income for both institutional investors and retail, according to a new report by JPMorgan.
CEO Jamie Dimon may not support crypto, but two JPMorgan analysts say PoS coin yields are attractive investments in this zero-rate environment
CEO Jamie Dimon may not support crypto, but two JPMorgan analysts are different about Ethereum 2.0
The authors in the new report estimate that holders of staked coins on the PoS blockchain are currently generating around $9 billion in annual revenue. And then, when Ethereum completes its transition from Proof-of-Work (PoW) to PoS next year, the analysts expect payouts will more than double to $20 billion. They project staking yields across the blockchain industry to double again to $40 billion by 2025.
“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,” the report stated.
The report also predicts that staking will become a growing source of income for cryptocurrency intermediaries like Coinbase, especially after Ethereum 2.0 is scheduled to be completed in 2022. The report estimates that staking offers a $200 million revenue opportunity for Coinbase in 2022, up from $10.4 million in 2020.
According to data from stakingrewards.com, currently staking into cryptocurrencies like SOL or BNB can earn returns ranging from 4% to as high as 10% annually. Although these are nominal yields, and their real ROIs are also a function of the market exchange value of the underlying currency. As the volatility of cryptocurrencies decreases, the ability to earn positive real returns will be an important factor in helping the market become more mainstream.
The two senior analysts also compared the financial incentives with staked cryptocurrencies to cash, cash equivalents, and fixed income instruments like U.S. Treasury bonds:
“Yield earned through staking can mitigate the opportunity cost of owning cryptocurrencies versus other investments in other asset classes such as US dollars, US Treasuries, or money market funds in which investments generate some positive nominal yield. In fact, in the current zero rate environment, we see the yields as an incentive to invest.”
According to the report, the current market capitalization of PoS tokens is over $150 billion. The authors predict that the ability to use crypto-assets to profit through staking will make cryptocurrency a more attractive asset class and could help grow crypto adoption in a way official. However, the ability to make consistently positive profits through crypto staking depends on the volatility of the market.
The JP Morgan analysts find the positive real yields of PoS coins, in addition to any expected market price appreciation attractive, writing:
“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.”
The PoS coin isn’t the only cryptocurrency to receive some serious treatment from JPMorgan. The financial services giant is reportedly preparing to offer some customers a Bitcoin fund. It could launch as soon as this summer. This new crypto product can also be actively managed, as opposed to similar passive Bitcoin funds offered by Pantera Capital and Galaxy Digital.
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