Chainalysis argues that ETH might become decoupled from other cryptocurrencies after Merge since its staking incentives could make it comparable to bonds or commodities.
Chainalysis, a company specializing in crypto-analytics, has claimed that the price of Ether (ETH) might decouple from other cryptocurrencies after the Merge, with staking returns possibly spurring widespread institutional adoption.
In a paper published on Wednesday, Chainalysis claimed that the next Ethereum update will expose institutional investors to staking rates comparable to those of products like bonds and commodities, while also becoming much more environmentally friendly.
ETH is an “attractive bond alternative for institutional investors” due to the fact that the rates on government bonds are much lower than those on ETH.
Ether’s price may decouple from other cryptocurrencies after The Merge due to the fact that its staking incentives will make it comparable to a bond or commodity with a carry premium.
According to Chainalysis statistics, the number of institutional ETH stakers — those with at least $1 million worth of ETH staked — has “steadily increased” from less than 200 in January 2021 to about 1,100 in August of this year.
The company says that if this figure grows at a quicker pace after The Merge, this should prove the idea that institutional investors “do indeed see Ethereum staking as a solid yield-generating strategy.”
The Chainalysis analysis also predicts that ETH will attract more retail and institutional traders after The Merge, since the next update will make staking a far more appealing investing instrument.
Currently, staked ETH is locked in a smart contract and cannot be withdrawn until the Shanghai upgrade is implemented around six to twelve months after the Merge.
As a consequence, the staked ETH market is now illiquid, causing some staking service providers to sell synthetic assets that approximate the value of the staked Ether. However, “these synthetics may not always preserve a 1:1 peg,” the business claims.
The article states, “The Shanghai update […] will enable users to withdraw staked Ether at whim, increasing liquidity for stakers and making staking an overall more appealing proposition.”
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