Crypto trading institution FalconX wrote an article stating that ETH staking income may play a key role in the next few quarters, especially as the Federal Reserve continues to cut interest rates, and with the 2024 election and the increase in global liquidity, ETH will Price benefits.
Recent market trends
Recently, BTC exceeded $65,000 for the first time, hitting a high since the end of July. This was mainly due to the start of the Federal Reserve's interest rate cut cycle and China's economic incentive policies to boost the market. But despite Bitcoin's rise, BTC only ranks third among cryptoassets with large market capitalization (more than $10 billion), and the ETH/BTC exchange rate also exceeded 0.04 for the first time in three years.
However, later also affected by the war in the Middle East, U.S. stocks and cryptocurrencies fell.
(Iran preparing to launch missiles? US stocks fell due to rising tensions in the Middle East and soaring oil prices, BTC fell to 62K)
9/20 – 9/27 Performance Comparison of risk-free interest rates and Ethereum staking returns
What FalconX mainly wants to discuss is that ETH staking returns may outperform the risk-free interest rate, thereby gaining wider attention.
David Lawant, director of research at FalconX, pointed out that since Ethereum shifted to Proof of Stake (PoS), the market has begun to pay attention to the correlation between Ethereum’s pledge yield and risk-free interest rates (such as the Federal Reserve funds rate). The data shows that the interest rate gap between the two has been negative since June last year, but is now narrowing and is likely to turn positive in the coming quarters.
The federal funds rate is likely to continue falling, with long-term interest rates in a range of 2.4%-3.8%, according to the Fed's latest economic forecasts, well below the current 4.75%-5%.
The market predicts that by June 2025, the Federal Reserve interest rate will drop to between 3.25% and 3.5%, causing the Ethereum pledge income and risk-free interest rate to gradually narrow and turn positive in the second quarter of 2025.
Ethereum transaction fees continue to rise
Ethereum transaction fees have continued to decline over the past three years due to the adoption of L2, and although transaction fees have recently increased, reaching the highest level in more than three months, this is still only 10-20% of the all-time high.
David Lawant is optimistic that active on-chain activities can still drive up transaction fees. In particular, the crypto bull market is often associated with more intense on-chain activities, and the increase in transaction fees will also directly benefit from ETH staking income and the price itself.
ETH daily transaction fee
David Lawant concluded that with the 2024 election and the gradual reduction of interest rates by the Federal Reserve, Ethereum staking revenue is expected to play a key role in the next few quarters, although the rise in staking revenue is unlikely to be the main driving force for ETH prices. But it will help attract more investors to pay attention to Ethereum and promote the further development of the DeFi market.
He said:
This won't be a short-term trend, but I'd be interested to see if such a potential trend occurs in 2025.
This article Staking outperforms the risk-free interest rate, FalconX: ETH staking income will become a new investment highlight, first appeared on Chain News ABMedia.
