Cody McGrath 
According to Chainalysis, the price of Ether (ETH) may decouple from other crypto assets after the Merge, with its staking yields perhaps driving significant institutional adoption.
According to a report released by Chainalysis on Wednesday, the future ETH upgrade would give institutional investors access to staking yields that are comparable to those of some securities, such as bonds and commodities, while also becoming much more environmentally friendly.
According to the paper, ETH staking is anticipated to provide stakers with an annual yield of between 10% and 15%, making it a “enticing bond alternative for institutional investors” given that treasury bond rates provide substantially less in comparison.
“Ether’s price could decouple from other cryptocurrencies following The Merge, as its staking rewards will make it similar to an instrument like a bond or commodity with a carry premium.”
Chainalysis data shows that from fewer than 200 institutional ETH stakers in January 2021 to about 1,100 as of August this year, the number of institutional ETH stakers—those with $1 million or more in ETH staked—has “been gradually expanding.”
According to the company, if this figure rises more quickly after The Merge, this should support the claim that institutional investors “do indeed view Ethereum staking as a good yield-generating strategy.”
The Chainalysis analysis predicts that after The Merge, ETH will attract more institutional and retail traders since the upcoming update will make staking a much more appealing investment instrument.
ETH that has been staked is currently trapped in a smart contract that cannot be released until the Shanghai upgrade, which will occur six to twelve months after the Merge.
Due to the current lack of liquidity in the staked ETH market, some staking service providers offer synthetic assets that approximate the value of the staked Ether. The disadvantage, according to the firm, is that “such synthetics don’t always retain a 1:1 peg.”
According to the report, “The Shanghai improvement […] will permit users to withdraw staked Ether at whim, offering additional liquidity for stakers and generally making staking a more appealing proposition.”
The Ethereum Foundation also points out that the proof-of-stake (PoS) shift will result in a 99% reduction in the energy consumption requirements for the Ethereum blockchain:
“The switch to PoS will also make Ethereum more eco-friendly, which could make investors with sustainability commitments more comfortable with the asset. This especially applies to institutional investors.”
This week, ConsenSys, the organization formed by Joseph Lubin, a co-founder of Ethereum and the creator of the MetaMask wallet, also released a research examining the “effect of the Merge on Institutions.”
Similar sentiments are expressed in the report regarding the institutional appeal of ETH staking rewards and environmental sustainability, but it also emphasizes the significance of the PoS Ethereum chain in “producing stronger security guarantees for institutional investors” and ETH’s potential to function as a deflationary asset:
“Reduced ETH issuance and increased burns will systematically reduce ETH supply — putting deflationary pressure on ETH, thereby alleviating institutional concerns of token price dropping to zero, and increasing likelihood of an increase in value.”