JPMorgan analyst Kenneth Worthington says digital currency exchanges like Coinbase will end up being a meaningful “beneficiary” of Ethereum’s long-awaited transition from proof-of-work (PoW) to proof-of-stake (PoW). Based on $2K ethereum prices and a 5% ethereum yield, Worthington explained that The Merge could boost Coinbase’s annual income by $80 to $100 million from staking services.
As the Financial Giant’s Market Strategists Focus in on The Merge, JPMorgan Analyst Says Staking Revenue Could Bolster Coinbase
The Merge is due to be completed by Ethereum in just 29 days. This will make a huge difference for the network that was operating as a PoW-based blockchain for seven year. That’s because the network will fully transition into a PoS distributed ledger system. Bitcoin.com News published a report on JPMorgan (NYSE : JPM) that stated strategists believed Ethereum Classic (ETC), could be benefited from The Merge. This is because ether miners will have to mine another Ethash-based cryptocurrency.
This week, JPMorgan analyst Kenneth Worthington explained in a note to investors that the crypto exchange Coinbase Global (Nasdaq: COIN) could be a “meaningful beneficiary” of The Merge. The investment bank’s analyst also noted that staking revenue could bolster exchanges like FTX, Binance, and Gemini as well.
“We see the staking revenue opportunity bigger (proportionally) than the income opportunity given we expect institutional staking clients will contribute meaningfully to [ether] staking revenue, but much less so for institutional customers,” Worthington said. “The vast majority of the economics remains with retail,” the JPMorgan analyst added. To become a validator, 32ether must be staked on your own. However, many exchanges provide ethereum staking services that have negligible threshold requirements for earning from staked assets.
JPMorgan’s Worthington Foresees The Merge Boosting Coinbase Revenue up to $100 Million
According to Dune Analytics’ ETH Staking Dashboard, Coinbase was one of the top ETH holders at the time this article was written. Coinbase holds 14.7%, or 1,966,080 Ethereum, of 13,326,533 Ethereum that was deposited into Ethereum 2.0. Coinbase has the highest staking position, while liquid staking services Lido and Kraken have larger positions. JPMorgan’s Worthington expects Coinbase to benefit significantly from the staking rewards.
“We estimate Coinbase incremental annual staking revenue from the Ethereum Merge of $650 million based on $2,000 [ether]• 5% [ethereum] yield. We see [an] incremental annual income of $80-$100 million of staking income,” Worthington’s note detailed.
To date, COIN has fallen 65.04%, with a share price of $357. The current share price, $85.44, is higher than the June 30 lows of $47. Furthermore, on August 16, Coinbase summarized in a blog post what customers “need to know” about the upcoming PoW to PoS transition. During The Merge, Coinbase will “briefly” pause ethereum transactions and it will not process withdrawals and deposits during the change. ERC20-based tokens added to top of Ethereum network are also subject to Coinbase’s pause.
Coinbase, along with a variety of other exchanges, were shut down on August 14. asked: “IIf regulators request you to censor at EthereumProtocol level will be with your validators. [the] protocol level (B) Shut down the staking service and preserve network integrity.” Coinbase co-founder and CEO Brian ArmstrongOn August 17, Twitter answered the question three days later.
“It’s a hypothetical we hopefully won’t actually face,” Armstrong wroteThis Thursday. “But if we did we’d go with (B), I think. We need to see the larger picture. There may be some better option (C) or a legal challenge as well that could help reach a better outcome.”
What do you think about the commentary from JPMorgan’s analyst Kenneth Worthington? Please comment below to let us know your thoughts on this topic.
Image creditShutterstock. Pixabay. Wiki Commons
DisclaimerThis article serves informational purposes. It does not constitute an offer, solicitation, or recommendation of any company, products or services. Bitcoin.com doesn’t offer investment, tax or legal advice. This article does not contain any information, products, or advice that can be used to cause or alleged result in any kind of damage.