What Could Strengthen Resilience by Excluding Staking from Ethereum ETFs?
The recent approval of Ethereum spot ETFs by the SEC has been a major victory for the cryptocurrency space. However, the decision to exclude staking from these ETFs could unintentionally benefit direct stakers and make Ethereum more resilient.
This development has generated excitement and strategic advantages within the Ethereum ecosystem. Notably, crypto journalist Laura Shin, host of the Unchained podcast, further elaborated on this matter.
One significant implication of excluding staking from ETH ETFs is that direct stakers stand to benefit from higher returns. The staking rewards, which currently yield around 3% APY, will not be available to ETF holders. Instead, individuals who stake their ETH directly or utilize staking services like Lido or Rocket Pool will receive these rewards. This effectively transfers value from non-stakers to those who engage in staking, enhancing their returns.
By not including staking in these ETFs, Ethereum’s high staking ratio issues can be addressed. Excessive staking ratios can lead to centralization and liquidity risks that could potentially impact the network. The exclusion of staking helps maintain a healthier balance within the network by locking up ETH liquidity without adding to the staking contracts. This move aims to alleviate concerns about an overabundance of staking and promote a better balance between staked ETH and non-staked ETH.
This cautious approach by the SEC in excluding staking from ETH ETFs aligns with the goal of simplifying the process before tackling more complex issues. Matt Hougan, CIO of Bitwise, explained on the Unchained podcast that the initial focus is on achieving a 90% stake without incorporating staking, with plans to address complications later. This conservative approach ensures regulatory compliance and market stability.
The approval of ETH spot ETFs is expected to attract significant institutional inflows, estimated to range from $15 billion to $45 billion within the first year. This influx of capital could enhance the liquidity and stability of the Ethereum market. Standard Chartered analyst Geoffrey Kendrick noted that this approval indicates that ETH and similar cryptocurrencies may not be classified as securities, opening the door for further ETF approvals. The growing political support for the crypto industry is evident, showing the increasing backing digital assets have received.
This approval sets a precedent for other altcoins, such as XRP and Solana, which are awaiting ETF approval. Crypto analyst Nick highlighted various catalysts for XRP, including tokenization, the potential IPO of Ripple, and the growing adoption of XRPL. With the approval of ETH ETFs, the pressure is mounting for similar developments for XRP. All eyes are now on the performance of the BTC pair.
Tags: Ethereum