Sep 08, 2022 03:00AM ET
By:AnalysisWatch
Chainalysis suggests that ETH could decouple from other cryptocurrencies post-merger as its betting rewards could resemble those of bonds or commodities.
Cryptocurrency analytics firm Chainalysis has suggested that the price of Ether (ETH) could decouple from other cryptoassets post-merger, as wagering returns could drive strong institutional adoption.
In a report Wednesday, Chainalysis explained that Ethereum's upcoming upgrade would introduce institutional investors to betting yields similar to those of certain instruments such as bonds and commodities, while also becoming much greener.
The report says that ETH bets are expected to offer 10–15% annual returns for bettors, making ETH an "attractive bond alternative for institutional investors" considering that Treasury bond yields offer much less in comparison.
According to Chainalysis data, the number of institutional ETH bettors—those with $1 million of ETH wagered or more—has "steadily increased" from less than 200 in January 2021 to about 1,100 in August of this year.
The firm notes that if this number increases at a faster rate after The Merge, this should confirm the
hypothesis that institutional investors "indeed see Ethereum bets as a good yield-generating strategy."
The Chainalysis report also predicts that ETH will attract more retail and institutional traders after the Merge, as the upcoming upgrade will make staking a much more attractive investment tool.
As such, the staked ETH market is currently illiquid, prompting some parking service providers to offer synthetic assets that represent the value of staked ETH. The downside, however, is that "those synthetics do not always maintain a 1:1 ratio," the firm argues.
The report says that "the Shanghai update [...] will allow users to withdraw staked ether at will, providing more liquidity to gamblers and making gambling a more attractive proposition overall," the report says.
The ConsenSys, the company behind the MetaMask wallet and founded by Ethereum co-founder Joseph Lubin, also released a similar report this week, analyzing the "impact of the merger on institutions."