Ethereum’s (ETH) staking ratio is currently at 14%. However, JPMorgan believes Ethereum’s upcoming Shanghai upgrade will increase the network’s staking ratio in the middle term. The financial giant said that ETH’s ratio has plenty of space to rise. This is because the average for other proof-of-stake (PoS) networks is nearly four times as high.
As per the data, the validator count might rise from 0.5 million to 2.2 million. Moreover, the return would drop from the present 7.4% to about 5% if the staking ratio eventually heads to the 60% average of other significant PoS networks.
Furthermore, the JPMorgan analysis states that future staking will move to liquid staking protocols, such as Lido on the Ethereum blockchain. The research emphasized how these protocols enable staked assets to have liquidity. These assets would otherwise be locked in staking contracts. Such protocols do this by “providing an equal amount of derivative token in exchange for staked ether which can be traded.”
JPMorgan points out that the prices at which liquid staking protocol derivative tokens usually trade are lower than those of the underlying asset. However, as the Shanghai upgrade draws closer, they are approaching parity with Ethereum (ETH).
Ethereum’s Shanghai upgrade is expected to take place in late February.
JPMorgan believes the utility of derivative tokens will not diminish after Ethereum’s upgrade
Some say that as the upgrade date nears, the utility of these liquid staking procedures will fall. The report claimed the argument against it is that the benefit of these protocols goes beyond only supplying liquidity. They also serve as a middleman for small-scale investors. Small investors would otherwise have to overcome a barrier of 32 ETH ($52,000) needed for staking.
Furthermore, investors increased their bets on the rise of decentralized staking products amid speculations that their centralized equivalents would be subject to a U.S. ban.
According to CoinGecko statistics, the average increase in the liquid staking market was 5.4%. Market leader Lido increased by 9% before declining on Thursday. Tokens from Stader and Rocket Pool both gained 10% over the last day.