JPMorgan Claims Bigger Revenue Opportunity for Coinbase With Ethereum Staking

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

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

“We see the staking revenue opportunity bigger (proportionally) than the income opportunity given we expect Institutional staking clients will contribute meaningfully to Eth staking revenue, but much less so for Institutional customers. The vast majority of the economics remains with retail,”

High Hopes for Coinbase

Despite going public last year, Coinbase struggled to maintain momentum during the intense market volatility. As per its second-quarter earnings, the exchange registered a loss of $1.1 billion on revenue of $803 million. Notably, both figures fell short of analyst expectations. Its revenue declined by almost 64% as investors exited the crypto market after last year’s dramatic run.

But the Merge, which is scheduled for mid-September, may prove significant for the exchange. Currently, the company holds a 15% market share of Ethereum assets. This is will give Coinbase a competitive advantage in this space, the New York-based investment bank claims. Coinbase’s new institutional-focused staking product,  and its CEO, Brian Armstrong, said he expects this will benefit its business model.

In short, Coinbase’s Ethereum holdings and its staking service for institutions are expected to boost its finances.

As per Worthington’s estimates, the exchange can potentially generate incremental annual staking revenue from the Ethereum Merge of $650 million with Ether’s price at $2,000 and a 5% ETH yield. “We see an incremental annual income of $80-$100mn of staking income,” Worthington added.

“We estimate Coinbase incremental annual staking revenue from the Ethereum merge of $650mn based on $2,000Eth and a 5% Eth yield. We see an incremental annual income of $80-$100mn of staking income.”

Institutional Staking: A “Phenomenon”

Coinbase’s chief financial officer Alesia Haas recently vouched that the Institutional staking of cryptocurrencies, including the post-Merge Ethereum, could potentially become a “phenomenon” in the future. At the Q2 earnings call, the exec, however, said that it is still “early days” for their new staking service.

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


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