crypto analytics firm has predicted that the price of Ether may decouple from the cost of other crypto assets following the Merge, with staking yields foreseeably driving good institutional adoption.
Chainalysis explained in a September 7 report that the upcoming Ethereum advancement would establish institutional investors to staking yields comparable to bonds and commodities while becoming even more eco-friendly.
According to the report, ETH staking is expected to provide a 10-15% annual yield for stakers, making it an enticing bond option for institutional investors when compared to treasury bond yields.
"The price may decouple from the price of other cryptocurrencies following The Merge, as its staking incentives will make it equivalent to an instrument like such a bond or commodity with a carry premium."
The data shows the percentage of institutional stakers — those who have staked $1 million or more in ETH — has been steadily increasing from less than 200 in January 2021 to around 1,100 in August this year.
According to the firm, if this number grows faster following The Merge, it will support the hypothesis that institutional investors do indeed see Ethereum staking as a good yield-generating strategy.
The report also predicts that it will attract more retail and institutional traders following The Merge, as the upcoming upgrade will make staking a much more appealing investment tool.
Staked ETH is currently locked up in a smart contract that can't be withdrawn until the Shanghai upgrade, which is expected to occur six to twelve months after the Merge.
As a result, the staked ETH market is currently illiquid, prompting some staking service providers to offer synthetic assets that represent the worth of the staked Ether; however, those synthetics don't always maintain a 1:1 peg, the firm claims.
According to the Foundation, the platform’s blockchain's proof-of-stake transition will reduce energy consumption by up to 99% following the upgrade.
"The transition to PoS will indeed make Ethereum more eco-friendly, which may make investors with sustainability initiatives feel more at ease with the asset. This is particularly true for institutional investors."
ConsenSys, the company behind the MetaMask wallet and established by the company’s co-founder Joseph Lubin, also released a report this week examining the impact of the Merge on Institutions.
The report echoes similar sentiments about staking rewards and ecological sustainability luring institutions. Still, it also emphasizes the importance of the PoS Ethereum chain producing better security guarantees for institutional investors and ETH's possibility to become a deflationary asset.
"Reduced ETH issuance and enhanced burns will systematically reduce ETH supply, putting deflationary strain on ETH and alleviating institutional concerns about token price falling to zero, while increasing the likelihood of a value increase."