Once an avid critic of the world of bitcoin and cryptocurrency, Wall Street giant JPMorgan Chase is now changing the mood! Two analysts from JPMorgan Chase rely on the development of Ethereum 2.0 Proof-of-Stake (PoS).
Ethereum 2.0 Staking Industry Could Be Worth $40 Billion in the Next Four Years
In the bank’s latest report, analysts wrote that Ethereum 2.0 could launch a staking industry worth $40 billion in the next four years, by 2025. Additionally, two senior analysts indicated that blockchain platforms will continue to gain more Popularity with low-energy networks.
Just like Bitcoin, the existing Ethereum blockchain follows the Proof-of-Work (PoW) consensus model. However, the ETH developers are now actively working on the next iteration – Ethereum 2.0 – which will introduce the staking mechanism via its PoS model.
According to analysts at JPMorgan Chase, the PoS blockchain network generates annual sales of $9 billion through its investments. Since Ethereum is likely to complete the transition from the existing PoW model to the Ethereum 2.0 PoS model, analysts indicated that it can greatly stimulate the adoption of the PoS mechanism.
As a result, JPMorgan Chase expects the betting premium to double to $20 billion. Analysts further indicated that staking returns will double back to $40 billion by 2025.
Competition with Traditional Debt Investments
In the report, JPMorgan Chase analysts added that a blockchain with a staking mechanism will undermine the market share of traditional bond issues. They compared the financial returns of crypto betting to cash and other fixed-income instruments like US Treasuries. The report says:
“Yield earned through staking can mitigate the opportunity cost of owning cryptocurrencies versus other investments in other asset classes such as the U.S. Dollars, U.S. 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.”
Currently, the total market value of PoS tokens is $150 billion. Analysts predict that the rising staking rate market will make cryptocurrencies more attractive. According to the data from StakingRewards, the annual return of the top ten staking cryptocurrencies by market value is between 3% and 13%.
The highest collateral value from Ethereum’s rival Cardano is more than $30 billion. This is three times that of Ethereum 2.0, which ranks second with a mortgage value of more than $11 billion. Interestingly, 75% of the Cardano (ADA) tokens are pawned, while ETH only accounts for 4.96%.
Hence, the full implementation of Ethereum 2.0 can increase ETH’s involvement. The report mentioned the positive results of the PoS network and the increase in the price of PoS tokens. It says:
“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.”
However, investors should be aware that generating sustained positive returns through crypto staking is largely dependent on market volatility. Therefore, if the price of staking tokens goes down, the returns may go down at the same time. But as market participation increases, the volatility will subside. So in the long run, staking will be worth it.
Ethereum 2.0 London HardFork
In July of this month, the Ethereum 2.0 mainnet will experience a major upgrade due to the London hardfork. For now, all eyes are on the implementation of EIP-1559, which will change the “base fee” structure of the Ethereum network.
It is reportedly designed to drain the Ethereum network, thereby reducing transaction costs. A week ago, the developers successfully implemented the Ropsten test network and burned more than 88K ETH coins. Ethereum miners oppose the implementation of EIP-1669 as it could reduce mining revenues.
