JPMorgan: Complete Transition to Ethereum 2.0 Will Kickstart A $40 Billion Staking Industry

Wall Street giant JPMorgan, which has been once an ardent critic of cryptocurrencies, is now seeing big potential in the Proof-of-Stake blockchain systems. Two senior analysts at the firm argued that blockchain with energy-efficient systems unlike Bitcoin and Ethereum continue to gain market traction and prominence.

The JPMorgan analysts believe that the crypto staking industry will be a big hit and a major source of revenue for retail and institutional investors alike. The existing bitcoin and Ethereum networks are energy guzzlers and face major challenges w.r.t to scalability.

The analyst added that Ethereum’s complete transition to Ethereum 2.0 will provide a major boost to the proof-of-stake (Pos) consensus mechanism.

As per the report accessed by Forbes, staking currently generates $9 billion in revenue for the overall crypto industry. Upon complete transition to Ethereum 2.0. by the next year of 2022, JPMorgan expects the staking industry to double up to $20 billion. Then, by 2025, the banking giant expects it grow it to a size of $40 billion.

The report reads: “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 to it, the two JPMorgan analysts also compared the financial incentives of staked cryptocurrencies to cash and other fixed incomes investment vehicles like the U.S. Treasury bond.

The report stated: "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.”

As per data on StakingRewards, the top ten digital currencies by staked capitalisation have annual staking rereads anywhere between 3% to 13%. The report also notes that the current market cap of All of the Proof-of-stake tokens is $150 billion.

The JPMorgan analysts note that the ability to earn staking yields via cryptocurrencies will make digital assets more attractive to investors. This will certain boost the adoption of crypto assets while posing a major challenge to the traditional banking space.

However, it shall also be noted that the ability to consistently generate positive staking yield depends a lot on market volatility. Thus, if the valuations of the staking crypto drops, the yield returns can drop simultaneously.

The report further predicts the role of crypto exchanges in the crypto staking economy. Currently, popular crypto exchanges like Gemini offer 7.4% APY on their crypto balances. JPMorgan predicts that staking will be a major source of income for exchanges like Coinbase. The report notes that staking present a massive $200 million revenue opportunity for coinable just by the next year of 2022. This is 20x from its current staking earnings.