By
Temitope Olatunji
April 18th, 2024
As Coinbase opens an ETH staking facility for institutional investors, this could prove to be a major income stream for the crypto exchange in the future.
There’s a strong euphoria surrounding the upcoming Ethereum Merge event next month on September 15. We have also seen the reflection of the same in the ETH price rally since the beginning of July 2022. Wall Street investment bank JPMorgan believes that crypto exchange Coinbase could benefit largely from the much-awaited Merge. In a note to investors on Wednesday, August 17, JPMorgan analyst Kenneth Worthington pointed out that Coibase’s Ethereum (ETH) holdings and its staking services for institutions shall help it financially.
Cryptocurrency exchange Coinbase introduced staking services for institutional clients earlier this month. Speaking on this matter, Worthington said:
“We see the staking revenue opportunity bigger (proportionally) than the income opportunity given we expect Institutional staking clients will contribute meaningfully to Eth staking revenue, but much less so for Institutional customers. The vast majority of the economics remains with retail.”
As the Merge event is approaching closer, the total number of staked ETH has also touched an all-time high. The total number of ETH stakers continues to rise despite a severe price decline this year. On the other hand, it turns out that Coinbase has a 15% market share of ETH assets.
“We estimate Coinbase incremental annual staking revenue from the Ethereum merge of $650mn based on $2,000Eth and a 5% Eth yield. We see an incremental annual income of $80-$100mn of staking income,” said Worthington based on the numbers.
Is the Merge Euphoria Ending?
Last week, Ethereum (ETH) surged all the way to $2,000. However, ETH has been on a decline for the fourth consecutive day in a row. In the last 24 hours, ETH is trading at 5.2% down at a price of $1,841 with a market cap of $225 billion.
David Kroger, digital data scientist at Cowen Digital, told Bloomberg that institutional players have positioned themselves well for the Merge. Kroger added:
“Institutions have been asking us about the Merge, along with the technicalities and probabilities associated with it for several months now”.
He further noted that he has seen some players take profit from the recent rally which might be the cause of the recent dip. Another reason why Ethereum (ETH) could be struggling to gain momentum would be the detractors looking to fork the chain away from the Merge. These are basically Ethereum miners wanting to continue with the PoW version of Ethereum.
Vitalik Buterin and other key market players have distanced themselves from the detractors. However, some exchanges like Binance and Poloniex are likely to support the ETHW version.