• Ethereum recently completed its Merge upgrade, allowing users to earn a yield from staking their Ether tokens.
• Staking rewards are divided among stakers, meaning the APY earned decreases as more users stake.
• Currently almost 19% of the total supply is staked, however this ratio is lower than other leading proof-of-stake coins.
Ethereum’s Merge Upgrade
In September 2022, Ethereum completed its long-awaited Merge upgrade, enabling users to now earn a yield from staking their Ether tokens. This has proved to be hugely popular and currently 19% of the total supply is staked – however this ratio is still lower than that of other leading proof-of-stake coins.
Staked Tokens Increase
The rate of increase in the number of tokens being staked has steepened significantly since the Shapella upgrade in April. This upgrade allowed previously locked up tokens to be withdrawn for the first time – however there was no mass exodus and instead more Ether has been added to the network since then.
What Does This Mean for Yield?
Staking rewards are divided amongst all participants on the network, meaning that as more people join and stake their tokens, the APY earned by individual investors inherently decreases. Furthermore, demand on the network increases gas fees which can also have an impact on yield – although it’s worth noting that higher gas fees could ultimately lead to better returns too.
Analysts Predict Basement Level Yields
Despite all these factors at play when attempting to predict where Ethereum’s yields may land in future, many analysts remain adamant that basement level yields of 1%-2% are inevitable in future due to increased competition from other blockchains and cryptocurrencies.
Ethereum’s Merge upgrade opened up entirely new investment opportunities for investors who can now earn a yield from staking their Ether tokens. The popularity of this continues to grow with almost 19% of total supply currently staked – although it remains up for debate as to where exactly yields will land in future given several factors at play such as gas fees and increasing competition from other networks and cryptocurrencies