As the world of cryptocurrencies evolves, Ethereum (ETH) investors are beginning to realize the power of returns and their potential impact on the crypto space. Yields, in essence, are the payments investors receive for holding cryptocurrencies, and they can take many shapes and forms.
How ETH returns could revolutionize the space
One of the most important things to understand about returns is that they exist on a risk curve. This means that the percentage of return paid to investors is a function of supply and demand, as well as the perceived risk associated with the cryptocurrency in question.
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For example, a cryptocurrency with limited supply and high demand is likely to outperform one with higher supply and lower demand. Similarly, a cryptocurrency that is perceived as less risky is likely to outperform one that is perceived as more risky.
According For cryptanalyst and researcher Adam Cochran, this is where the potential of cryptocurrencies really shines.
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I think most people in crypto don’t fully understand or appreciate returns and what it can mean for the crypto space as a whole, as it’s one of the things that makes me incredibly bullish on the space.
And it’s part of why I think ETH still has a 20x+ in its future.
—Adam Cochran (adamscochran.eth) (@adamscochran) May 15, 2023
By creating non-dilutive returns through the use of fees, cryptocurrencies can offer investors a way to earn passive income without the risk of inflation. This is particularly important in a world where traditional investments like savings accounts and bonds offer little or no return.
One cryptocurrency that is particularly well positioned to harness the power of returns is Ethereum. With its growing ecosystem of decentralized applications and smart contracts, ETH has the potential to generate significant fees for investors through its use as a platform for decentralized finance (DeFi) applications, according to Cochran.
For example, staking in ETH currently offers returns in the range of 5-7%, while staking in Synthtetix (SNX) can yield returns of up to 24% in external fees. Similarly, the Curve (CRV) bet can generate returns of up to 15% in crvUSD fees. This means that billions of dollars in equity can now generate returns of more than 3% annual percentage yield (APY), which is a significant opportunity for investors.
This is particularly important in a world where traditional investment opportunities, such as savings accounts and bonds, offer little or no return. As more investors realize the potential of cryptocurrencies to generate high returns with acceptable levels of risk, this is likely to lead to more interest and investment in the space.
From HODLing to performance
In his recent post, Adam Cochran emphasized the importance of focusing on asset productivity and actual performance in the cryptocurrency space. Despite the current narrative that fundamentals don’t matter and memes and rhetoric dominate the market, Cochran believes that one day, the true value of assets will become apparent.
According to Cochran, those who already own assets have the advantage, as they can earn significant capital gains on top of the 2% APY on the face value of the asset. This is particularly relevant in the cryptocurrency space, where prices can be extremely volatile and subject to sudden fluctuations.
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Furthermore, Cochran predicts that as funds of increasing size begin to realize the long-term potential of the cryptocurrency space, they will begin to invest heavily.
This influx of capital will fundamentally change the financial industry, and those who have acquired a significant amount of coins prior to this change will reap the benefits.
Featured Image from Unsplash, Chart from TradingView.com
