Decentralised Finance

JP Morgan hypes up staking – claims industry will be worth $40 billion by 2025

  • A report from analysts at the US investment bank claims that the staking will help crypto go mainstream as volatility decreases
  • Staking will likely be a more significant source of income for crypto intermediaries, such as Coinbase, once Ethereum 2.0 is launched
  • 10% yields could draw in more investors to make staking more viable

The analysts behind the research claim that the improvements seen to blockchain technology will allow staking to come to the fore and bring it to a wider audience, allowing for greater adoption of crypto assets.

The report says that current revenues for staking are at around $9 billion a year, with this figure set to increase to $40 billion by 2025. This, the analysts claim, will be driven by improvements to blockchains, such as the planned upgrades for Ethereum 2.0 and the switch to proof-of-stake.

JP Morgan can be said to have been playing both sides so far in the crypto debate among institutional investors. Although the CEO is openly sceptical about crypto assets, the company launched its own stable coin in 2019 called JPMCoin that is pegged to the US dollar. 

What’s at stake?

The report points out that a market downturn for the staked currency would reduce earnings. However, we would point out that at the end of this the holder would still own more of their staked cryptocurrency and could wait for when prices (hopefully) start to recover. Staking, therefore, is for the long term and not for earning a quick buck in a few short months.

The report did highlight some of the other positive aspects of staking: “Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases cryptocurrencies pay a significant nominal and real yield.”

In addition, the report claimed that: “Yield earned through staking can mitigate the opportunity cost of owning cryptocurrencies versus other investments in other asset classes such as US dollars, US Treasuries, or money market funds in which investments generate some positive nominal yield. In fact, in the current zero rate environment, we see the yields as an incentive to invest.”

Here the writers of the report are pointing to the historically low-interest rates that have been present ever since the aftermath of the 2008 financial crisis. This has impacted consumers’ ability to save and hedge against inflation. 

Stalking provides a way to beat inflation by holding (hopefully) appreciating assets combined with the high yield rates that you will be hard-pressed to find at a bank over the last 12 years or so.

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