JPMorgan claims greater revenue opportunity for coin base with Ethereum stake

Analysts from the prominent investment bank JPMorgan believe that Coinbase will benefit meaningfully from the upcoming merger. In a note to clients on Wednesday, analyst Kenneth Worthington said the San Francisco-based crypto exchange has taken concrete steps in an effort to maximize the value of ETH staking for its clients.

This is expected to result in higher revenue generation in itself. Worthington claimed,

“We see the stake revenue opportunity greater (proportionally) than the revenue opportunity given we expect institutional stake clients to contribute meaningfully to Eth stake revenue, but much less so for institutional clients. The vast majority of the economy remains with retail,”

High hopes for Coinbase

Despite going public last year, Coinbase struggled to maintain momentum during the intense market volatility. According to results for the second quarter, the exchange registered a loss of 1.1 billion dollars on a turnover of 803 million dollars. In particular, both figures fell below analysts’ expectations. Revenue fell by nearly 64% as investors exited the crypto market after last year’s dramatic run.

But the merger, which is planned for mid-September, could prove to be important for the exchange. Currently, the company has a market share of 15% of Ethereum assets. This will give Coinbase a competitive advantage in this area, the New York-based investment bank claims. Coinbase’s new institutional-focused stake product, and CEO Brian Armstrong said he expects this to benefit the business model.

In short, Coinbase’s Ethereum inventory and institutional staking service is expected to boost the economy.

According to Worthington’s estimates, the exchange could potentially generate incremental annual stake revenue from the Ethereum merger of $650 million with Ether’s price at $2,000 and a 5% ETH yield. “We’re seeing an increased annual income of $80-$100 million of wagering income,” Worthington added.

“We estimate Coinbase incremental annual staking revenue from the Ethereum merger at $650m based on $2000Eth and a 5% Eth return. We see incremental annual revenue of $80-$100mn of staking revenue.”

Institutional effort: A “phenomenon”

Coinbase’s CFO Alesia Haas recently confirmed that institutional betting of cryptocurrencies, including post-Merge Ethereum, could potentially become a “phenomenon” in the future. However, on the Q2 earnings call, the executive said it’s still “early days” for its new betting service.

As such, any “real material impact” can only be seen after the creation of a floating stake option for post-Merge Ethereum.

SPECIAL OFFER (sponsored)

Binance Free $100 (Exclusive): Use this link to sign up and receive $100 free and 10% off Binance Futures first month (terms).

PrimeXBT Special Offer: Use this link to sign up and enter code POTATO50 to receive up to $7,000 on your deposits.

Leave a Reply

Your email address will not be published.