I’m one of the biggest advocates for Ethereum. But I hate to admit this…
The network is holding our money hostage.
Ethereum is paying out $1 billion in staking rewards each year… But no one can access this money.
That’s about to change, though. In March, all that capital will be set free. And when it is, we’ll see a massive opportunity.
If you don’t know me, my name is Houston Molnar. I’m Daily editor Teeka Tiwari’s chief analyst on his flagship crypto advisory, Palm Beach Confidential.
For years, I’ve watched Ethereum grow to become the most successful blockchain network for applications. Today, it’s second only to bitcoin in terms of market cap.
The biggest trends in blockchain – including decentralized finance (DeFi) and non-fungible tokens (NFTs) – first gained traction on Ethereum. And it remains home to most of the activity.
Today, 60% of assets held in DeFi applications live on Ethereum. And roughly 80% of NFT trades by volume occur on the network.
Ethereum also has 3x more developers working on it than its closest competitor. And it generates roughly 10x more revenue from transaction fees than its closest competitor.
But while Ethereum is the second-largest blockchain network in the world, it’s the least-staked token compared to other major networks.
[When you stake crypto assets, you help secure the crypto’s underlying network. In return, you receive more crypto as a reward. It’s similar to earning a stock dividend or a bond yield.]
You can see that in the chart below…
Ethereum is the least-staked token because it has the highest risk.
But that’s about to change. And it will be incredibly bullish for Ethereum going into the second half of 2023.
Here’s the problem…
If you stake Ethereum to earn income today, you can’t withdraw your tokens.
That’s because the network hasn’t developed a feature to withdraw (or “unstake”) your tokens yet.
Meanwhile, you can stake and unstake the other tokens in the chart above whenever you want.
The inability to access capital indefinitely isn’t a risk that big institutions are willing to accept.
But that’s about to change…
This Upgrade Will Free ETH
Ethereum will roll out its next network upgrade this March – the Shanghai upgrade.
After the upgrade, ETH stakers can access their tokens as they please.
Now, many Ethereum investors are dreading this upgrade.
They believe droves of stakeholders will withdraw their tokens and sell them – putting downward pressure on prices.
And while we’ll likely see some selling pressure in the days following the upgrade… Over the long term, it’ll be incredibly bullish for Ethereum.
That’s because the Shanghai upgrade will lower the risks of staking Ethereum.
Here’s what I mean…
Capital flees from investments that hold it hostage. So, the ability to withdraw staking funds whenever you want will be an overall positive… And opening the doors for capital to come and go will attract more investors.
While we’ll likely see some selling pressure shortly after the upgrade… our research suggests the outflow of Ethereum will reverse quickly.
That’s because the staking rewards on Ethereum are very attractive.
Currently, Ethereum generates roughly $1 billion in staking rewards each year. And that’s during a bear market.
During the next bull market, we believe staking rewards could swell to $40 billion annually.
Unleashing Potentially $40 Billion in Income
Today, there’s roughly 16 million ETH staked… and they’re earning roughly 4-6%.
But during periods of high network activity – like we saw in the days surrounding the FTX exchange collapse – this yield climbed above 10%.
That’s because users are willing to tip network validators more to give them priority and execute their transactions faster.
When the bull market resumes, we can expect network activity to explode higher – like it did from 2020-2021.
That would translate to roughly 1.6 million in ETH paid to stakers annually. Or $2.5 billion in income if Ethereum remains at $1,600.
However, we believe Ethereum could soar to $25,000 during the next bull market.
That’s more than a 5x increase from its previous all-time high.
If so, we could see roughly $40 billion annually paid to Ethereum stakers.
If $40 billion in yearly income sounds crazy, just remember we’re currently sitting at $1 billion in the middle of a brutal bear market – when network activity is extremely low.
So $40 billion isn’t some pie-in-the-sky number. Especially when some of the biggest names on Wall Street and major global corporations are getting involved in this space.
And major crypto exchanges are already positioning themselves to benefit from this flood of income we’re about to see.
Many of the largest exchanges already provide ETH staking services to their users. And in doing so, they charge a fee.
Coinbase, Binance, and Kraken alone are staking $7 billion worth of ETH for their users.
You see, everyone knows that this change is about to happen. And the biggest industry players are positioning themselves to benefit from it today.
Throughout January, Ethereum developers have been hard at work running tests on this new code to ensure it’s ready for March. And when it rolls out, a flood of income will be unlocked for ETH token holders.
Profiting From This Event
If you want to take advantage of this event, consider adding Ethereum (ETH) to your portfolio if you haven’t.
While it’s still a highly volatile asset, it’s one of the safest bets you can make on the blockchain industry.
And once ETH starts paying out regular income, it’ll attract investors who previously overlooked it.
Remember, Ethereum is the largest blockchain application platform with the most developers. This is critical to its success since developers are responsible for building and implementing tomorrow’s technology.
On top of this, Ethereum generates more income from user transaction fees than any other network. (About $1 billion per year.)
In other words, there’s more demand to use Ethereum than any other blockchain network.
That’s why I believe Ethereum is a must-own asset. And with the upcoming upgrade, it’ll see a massive tailwind in demand.
Analyst, Palm Beach Daily