JPMorgan News: Analysts at Wall Street investment bank JPMorgan noted that staking will gain traction as a source of income for institutional and individual investors. In a report this week, analysts argued against the stance of Jamie Dimon, the bank’s disdainful CEO of crypto, arguing that blockchains, which run more energy-efficient networks than Bitcoin, will grow in popularity.
According to the report, staking (holding cryptocurrencies to generate returns) currently generates an estimated $9 billion in annual revenue for the crypto industry. The researchers predict that the transition of Ethereum to proof-of-stake after the launch of ETH 2.0 next year will encourage the adoption and staking of the alternative consensus mechanism.
As Forbes reports, this could result in staking payments rising to $20 billion following the launch of ETH 2.0 and $40 billion by 2025.
Staking beats mining
Staking rewards token holders rather than mining holdings, making it more attractive to retail and institutional investors. The JPMorgan report noted:
“Not only does staking reduce the opportunity cost of holding cryptocurrencies compared to other asset classes, but in many cases cryptocurrencies provide a significant nominal and real return.”
The report noted that as the volatility of cryptocurrencies declines, the ability to generate a positive real return will be a key factor in helping the crypto market become more mainstream.
JPMorgan research suggests that the staking economy will generate millions of dollars in revenue for exchanges and companies offering staking services and making cuts. Research estimates that staking offers a revenue opportunity for Coinbase of $10.4 million in 2020 and $200 million in 2022. The research noted that Stake and DeFi offer much better returns than the traditional banking system, where interest rates bottom out or in some cases are negative.
“In fact, in the current zero-interest environment, we see returns as an incentive to invest.”
Ethereum staking will be on the rise
In April, CryptoPotato reported that JPMorgan had begun hiring Ethereum developers. The authors speculate that the ability to use crypto assets to generate returns through staking will make digital assets a more attractive asset class and could aid mainstream adoption of cryptocurrencies.
The report mentioned several times that Ethereum, which has experienced a decrease in hash rates, is transitioning to full proof-of-stake, which is expected to happen next year. At the time of writing, the ETH 2.0 Beacon Chain was concentrated at just under 6 million ETH. That’s just over 5% of the entire supply, which is worth about $12.3 billion at current prices. It was yielding a 6.4% annual return, which was far beyond the yield at any major bank.