Ethereum Merge and Institutional Investors

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Ethereum’s switch is known as “The Merge” because Ethereum’s PoS blockchain, known as Eth2, has been operating in a testing state known as the Beacon Chain since late 2020. With The Merge, Eth2 and Eth1 will come together to form one blockchain, with Eth1 acting as the execution layer handling transactions and Eth2 as the consensus layer handling PoS consensus

The prices of cryptoassets like Bitcoin have become more correlated with those of tech stocks and other high-risk, high-upside assets. However, Ether’s price could decouple from other cryptocurrencies following The Merge, as its staking rewards will make it similar to an instrument like a bond or commodity with a carry premium. Some predict that between staking rewards and transaction fees distributed to validators, stakers can expect Ether yields of 10–15% annually, and that’s before factoring in the potential for the price of Ether itself to rise, which would also increase returns in terms of fiat value (of course, Ether’s price could also fall, which would hurt fiat returns). Those returns could make Ethereum staking an enticing bond alternative for institutional investors.

It’ll be interesting to see if the number of institutional-sized stakers increases at a faster rate following The Merge, as this could suggest that institutional investors do indeed see Ethereum staking as a good yield-generating strategy

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