Consolidated Ethereum's price could 'decouple' from other cryptocurrencies

Crypto analysis firm Chainalysis said ethereum's price could decouple from other crypto assets after consolidation, and its staking yield could drive strong institutional adoption.

In a Sept. 7 report, Chainalysis explained that the upcoming ethereum upgrade will allow institutional investors to obtain staking returns similar to instruments such as bonds and commodities, while also becoming more environmentally friendly.

According to the report, ETH staking is expected to provide pledgers with 10-15% annual yields, so, given that Treasury bond yields are much lower in comparison, ETH will become an "attractive bond for institutional investors." alternatives".

“Post-merger, ethereum’s price could decouple from other cryptocurrencies as its staking rewards would make it similar to instruments like bonds or commodities with an arbitrage premium.”

According to Chainalysis, the number of institutional ETH stakers (those with stakes worth $1 million or more) has been “increasing steadily,” from less than 200 in January 2021 to about 1,100 in August of this year.

If that number grows at a faster rate post-merger, it should confirm a hypothesis that institutional investors “do view ethereum staking as a good yield-generating strategy,” the firm noted.

The Chainalysis report also predicts that ETH will attract more retail and institutional traders post-merger, as the upcoming upgrade will make staking a more attractive investment vehicle.

The currently pledged ETH is locked in a smart contract and can only be withdrawn when the Shanghai upgrade arrives about 6 to 12 months after the merger.

As a result, the Ethereum staking market is currently illiquid, leading some staking service providers to offer synthetic assets that represent the value of the Ether being staked, but the downside, according to the company, is that “these synthetic assets do not always maintain a 1:1 peg. ".

“The Shanghai upgrade … will allow users to withdraw staked Ethereum at will, providing more liquidity to stakers and making staking more attractive,” the report reads.

Another factor highlighted in the report is that, according to the Ethereum Foundation, the ethereum blockchain’s transition to proof-of-stake will see its energy consumption requirements drop by as much as 99% after the upgrade.

“The shift to PoS will also make Ethereum greener, which may give investors with sustainability commitments more confidence in the asset. This is especially true for institutional investors.”

ConsenSys, the company behind the MetaMask wallet founded by ethereum co-founder Joseph Lubin, released a similar report this week examining the “institutional impact of the merger.”

The ConsenSys report echoes similar sentiments about institutionally-attractive ETH staking rewards and environmental sustainability, but also highlights the importance of the Ethereum PoS chain "providing stronger security for institutional investors," and the fact that ETH will become deflationary Asset Potential:

“The decrease in ETH issuance and the increase in burns will systematically reduce the supply of ETH, putting deflationary pressure on ETH, thereby alleviating institutional concerns about token prices falling to zero and increasing the possibility of value appreciation.”