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According to investment bank JPMorgan, the long-awaited merger of Ethereum could be advantageous for cryptocurrency exchange Coinbase. Analyst Kenneth Worthington stated that the San Francisco-based exchange will benefit financially from its Ethereum holdings and its staking service for institutions in a note to investors on Wednesday.
Amid the bear market, Coinbase’s financial results haven’t been great: earlier this month, It reported $1.1 billion in net losses for the most recent financial quarter as trading activity on the exchange dropped by 29%.
But the New York-based investment firm claimed that Ethereum’s transition to ETH 2.0 would benefit the business. The investment bank stated today that Coinbase’s Ethereum staking service could provide a “bigger revenue opportunity”
“We see COINBASE as a meaningful beneficiary of the Ethereum Merge,” the JPMorgan note read. “Coinbase is bigger in Ethereum than was intuitive to us, thus leading directly to a bigger revenue opportunity.”
Saying: “We believe that Coinbase has taken a series of steps to maximize the Ethereum staking revenue opportunity.”
The “merge” update, which is coming to Ethereum, the second-largest cryptocurrency by market cap, will change the way it operates. By doing this, the blockchain will transition to a proof-of-stake consensus system.
Ethereum now employs the same proof-of-work consensus algorithm as Bitcoin. To create new blocks and receive bitcoin rewards under this system, miners engage in an energy-intensive procedure to try to solve complex mathematical equations.
However, the switch to proof of stake for Ethereum will do away with the necessity for miners. By locking up the network’s native cryptocurrency, validators will take their position and maintain the network’s security. This may be done on exchanges like Coinbase.
With a 15% asset share in Ethereum, according to JPMorgan, Coinbase has a significant competitive edge in this market. This month, Coinbase began providing staking to institutional clients, and according to Brian Armstrong, the company’s CEO, this will help the company’s business model.
According to JPMorgan’s report, Coinbase could receive an additional $650 million in yearly staking revenue from Ethereum’s “merge,” with Ethereum selling at $2,000 and a 5% yield. Ethereum is currently trading at $1,838.56, a 2.26% decrease in the last 24 hours.
The transition to ETH 2.0 is expected to be finished by September 15 or 16. It is hoped that it will make the network faster, more scalable, and less energy-intensive, unlike Bitcoin, which is criticized for not being green.
