Ethereum (ETH) Staking ETF
To elaborate:
Can Ethereum's future rely on staking ETFs to welcome a wave of price increase?
The answer is affirmative.
First, let's talk about the benefits brought by staking ETFs:
1. Additional income
Currently, the annualized return rate for staking ETH is about 3%. (as shown in figure two)
2. Lower staking threshold
Currently, the minimum threshold for staking ETH is 32 ETH, while staking ETFs have no threshold restrictions.
3. More flexible operations
Currently, if you want to redeem staked ETH, you need to wait several days to several weeks to get back the assets, but staking ETFs do not require that; they fully comply with securities trading rules, meaning selling is not subject to staking time limits, and you will still receive funds on T+2 day.
This is based on the spot ETFs approved by the SEC, which include this point in cash form (as seen in BlackRock's example in figure three), and currently, companies applying for Ethereum staking ETFs, like 21Shares, have hinted at this in their statements.
Therefore, this point of 'conducting in cash form' is very important in the realm of possibilities. Because of this, investors can avoid the waiting time for staking. (Here, we do not discuss authorized participants AP, but only in terms of general investors).
4. Managed by a professional team
Of course, this means you don’t have to hold Ether yourself, yet enjoy the same price increases, and you don’t need to learn those blockchain operational methods, which pose higher risks for personal operations. It’s safer and more convenient to let a professional team handle it.
Next, let's talk about the impact of Ethereum's upcoming Pectra upgrade on staking ETFs. The most direct effect is the upgrade of EIP-7251, which enhances the overall staking efficiency, increases the compounding effect, and reduces management expenses, as follows:
1. Reduced operating costs, management fees may decrease.
Originally, a large amount of ETH needed to be split into multiple 32 ETH nodes, but now the single node limit has been raised to 2048 ETH (as shown in figure four), reducing technical maintenance costs. This may lower the management fees of ETFs (e.g., from 0.5% to 0.4%).
2. Enhanced compounding effect, higher annual returns.
After the limit is raised to 2048 ETH, compounding becomes stronger.
For example: Originally, staking 100 ETH would yield an actual compound interest of only 96 ETH (3 nodes), but after the upgrade, 100 ETH can be calculated as a full single node.
Overall annualized returns will also increase from 3% to 3.1%-3.2%.
3. Fund companies are happy, and investors are happy.
Higher staking efficiency is more friendly to institutions, which may drive more capital into staking ETFs, creating a positive cycle!
Conclusion
With Ethereum staking ETFs, it's time for a big market surge in Ether!
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