JPMorgan believes that up to 95% of Coinbase Global’s retail clients will opt for the staking service after the Shanghai update.
Ahead of the upcoming Shanghai Update of the Ethereum network, analysts at American multinational investment bank JPMorgan Chase & Co (NYSE: JPM) are optimistic that Coinbase Global Inc (NASDAQ: COIN) will be among the main beneficiaries.
With the Shanghai Update scheduled to launch in March, investors will be able to withdraw their staked Ethereum, some dating back to December 2020 when the deposit address for Beacon Chain was first published. The protocol has transitioned to Proof of Stake (PoS) and the participation of ETH makes it possible for transactions to be validated. Typically, participants earn a reward for their investments.
According to JPMorgan, this event will benefit Coinbase as it can enroll its users for automatic staking, making it possible to earn rewards from them. It’s worth noting that if this assumption is true, analysts projected that Coinbase may earn staking revenue in the range of $225 million and $545 million per year.
“Betting on Ethereum forced holders to lock up their Ether indefinitely, which we have historically seen as a huge disincentive to staking on ETH,” he stated. “We believe the Shanghai Fork could usher in a new era of gambling for Coinbase.”
According to analysts, Coinbase has not openly stated that its clients will be automatically enrolled in the staking service. However, they noted that their assumption is based on previous moves by the crypto trading platform that also supports staking for Cardano (ADA), Solana (SOL), and Tezos (XTZ), among others.
As part of its expectations, JPMorgan believes that up to 95% of Coinbase Global’s retail clients will opt for the staking service after the Shanghai update. They undertook this because they believe that users may find it difficult to give up the reward associated with staking their coins.
Will Coinbase follow the path set by JPMorgan?
The digital currency ecosystem has been very tied up for the past few years and Coinbase posted a significant pullback in both its earnings, share price, and overall performance sentiment.
While it remains a wide assumption whether Coinbase will follow the path laid out by JPMorgan analysts, one thing is certain, and that is the fact that the exchange needs a very sharp approach to solving its current liquidity and profitability problems.
Over the course of the past year, Coinbase has been cutting costs, as evidenced by the layoff of around 2,050 employees, citing harsh market conditions as the reasons for the layoff. The exchange requires quick intervention to return to its glory days, and JPMorgan experts believe that one of the easiest ways to do this is through its staking program.
Coinbase shares have been rejuvenated for most of this year and closed Friday’s session up 11.61% at $55.16.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
