The U.S. Ethereum exchange-traded funds (ETFs) may soon launch staking rewards, according to a report by Bernstein Research on December 2.
Key Points
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Bernstein believes that under the new Trump 2.0 crypto-friendly Securities and Exchange Commission (SEC), Ethereum (ETH) staking rewards may be approved.
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Staking involves locking Ethereum as collateral with validators on the Ethereum blockchain network, where stakers can earn ETH rewards from network fees and other incentives, but may face the risk of "slashing," which means losing their ETH collateral if validators act improperly.
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Currently, the annualized staking yield for Ethereum is about 3.1%, and as activity levels on the Ethereum network increase, yields are expected to rise further to 4-5%.
In July, the SEC approved the trading of spot Ethereum ETFs in the U.S. but prohibited these funds from staking ETH for additional rewards, despite repeated requests from ETF issuers like Fidelity, 21Shares, and Franklin Templeton.
Now, President-elect Trump has promised to make the U.S. a "global crypto capital" and plans to consider appointing crypto-friendly leaders to oversee financial regulation when he begins his presidential term on January 20, 2025.
Bernstein states that this could lead to the approval of staking happening sooner than previously expected.
Risks and Rewards of Ethereum
Analysts also indicated that they see ETH as an attractive investment opportunity, noting that investor interest is rising after its underperformance relative to Bitcoin (BTC).
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Bernstein points out that Ethereum's fundamentals look strong, and recent changes in ETF fund inflows indicate that investor interest is steadily recovering.
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In 2024, net inflows into Ethereum investment funds reached a record $2.2 billion, finally surpassing the previous record of about $2 billion in 2021, reflecting a dramatic turnaround in sentiment towards ETH.
Matthew Sigel, head of digital asset research at VanEck, expects that by 2030, the Ethereum network will generate up to $66 billion in annual free cash flow, driving the price of spot ETH to $22,000 per token.