Analysis: The yield on Ethereum staking may exceed the U.S. interest rate in the next year, thereby pushing up the price of ETH

According to reports, the return rate of Ethereum staking is expected to exceed U.S. interest rates in the next year. This shift could boost Ethereum's price as investors seek higher returns. Since mid-2023, the spread between Ethereum's composite staking rate and the Effective Federal Funds Rate (EFFR) has been negative. However, according to predictions by cryptocurrency trading and institutional brokerage firm FalconX, this spread is expected to enter positive territory by mid-2025, creating a "double whammy" effect that pushes up ETH prices.

FalconX pointed out in an investor report that recent decisions by the Federal Reserve to cut interest rates and expectations for future cuts will reduce yields on traditional assets such as U.S. Treasury bonds, narrowing the spread with Ethereum staking. Currently, the yield from Ethereum staking is about 3.2%. In addition, as activity on the Ethereum blockchain increases and transaction fees rise to their highest levels in nearly two months, this further enhances staking returns.

FalconX believes that a combination of falling U.S. interest rates and rising Ethereum yields will turn this price difference into a positive value over the next two quarters enhancing Etherum’s competitiveness . However Jamie Coutts , chief crypto analyst at Real Vision stated that institutional investors may prefer regulated products like ETFs for gaining stake rewards , demand might be affected depending upon SEC approval . Although some mature asset management companies and private wealth firms may invest directly but traditional institutions' demand or development for direct investment might be slow.