The trends in Ethereum staking are changing for the better for investors as the U.S. interest rates continue to fall and the transaction costs on the Ethereum network are rising. Crypto brokerage firm FalconX has estimated that the spread between Ethereum staking yields and US Treasury bond yields could decrease. The brokerage also believes that Ethereum staking returns could outstrip the average in the second half 2025.
Yield Spread Narrowing
From mid-2023 the Ethereum Composite Staking Rate has consistently been under the Effective Federal Funds Rate. However, two factors can alter this scenario: the foreseen decline in US interest rates together with a boost in Ethereum staking rewards. As per the investor memo from FalconX, the yield difference could tighten over the next two quarters.
Anticipations suggest that the US Federal Reserve will maintain its interest rate reductions until at least 2025. The probability of rates falling to 3.75% by March 2025 is estimated at 85% and 90% to touch 3.5% by June next year based on data from CME FedWatch. This number seems to be less than the yield gap of approximately 3.2% for Ethereum staking.
Staking Performance History
David Lawant, head of research at FalconX, noted that Ethereum staking rates have not meaningfully exceeded US interest rates since the FTX debacle in the last bear market of 2022. According to Lawant, the current environment is not ideal for comparing Ethereum’s staking rates with risk-free assets, as a proper crypto bull market will paint a clearer picture.
Ethereum Price Surges as Bull Market Support Band ApproachesVitalik’s Wallet Activity
According to the blockchain analytics platform Spot On Chain, Ethereum co-founder Vitalik Buterin was associated with a lot of wallet movement. On Monday, in an X post, the platform shared that Buterin’s wallet transferred 649 ETH ($1.72 million) to Paxos. In the last 11 days, his wallet has sent 1,300 ETH to Paxos at an average price of $2,581, showing a clear strategy as Ethereum’s price returns.
Wallet “0x556,” associated with @VitalikButerin, deposited the last 649 $ETH ($1.72M) to #Paxos ~20 hours ago.
— Spot On Chain (@spotonchain) September 30, 2024
Notably, on Sep 19, wallet “0x556” received 1,300 $ETH ($3.21M) from wallet “0xd04,” which got funded with 70K $ETH by Vitalik Buterin in 2022.
Over the past 11 days,… pic.twitter.com/tuRYZKGmiV
These factors, together, make Ethereum staking look very promising. With the yield gap closing and institutions getting involved, Ethereum may become an even more attractive asset in the financial market.
