Shanghai Update Could Brighten Coinbase Outlook: JP Morgan

Analysts at JP Morgan say crypto fans who own Ethereum are eagerly awaiting the network’s next update, but may also be looking forward to cryptocurrency exchange Coinbase.

The next upgrade to Ethereum’s network, called the Shanghai Fork, is scheduled for March and will give people access to the funds that were previously dedicated to Ethereum’s beacon chain.

Analysts at JP Morgan said in a recent research report that Ethereum staking could be a big win for Coinbase if users are automatically enrolled in the same way tokens like Cardano and Solana do. says.

“Staking into Ethereum forced owners to lock their Ether indefinitely, which has historically been viewed as a major disincentive to staking Ethereum.” “We believe the Shanghai fork could usher in a new era of coinbase staking.”

An investment bank estimates that 95% of Coinbase’s retail investors will be able to participate in Ethereum staking after the Shanghai fork, potentially generating between $225 million and $545 million in annual revenue. I’m here.

Currently, Coinbase users must opt-in to stake Ethereum. This is because they have no way to access the rewarded deposit or her ETH. This is what Shanghai Fork addresses. JP Morgan estimates the exchange is already making around $50 million annually through Ethereum staking.

The additional earnings could bring some warmth to Coinbase in the current crypto winter. announced The company’s operations in Japan were due to come to an end last Wednesday. The exchange also said he had two layoffs in the past year, with him laying off about 1,100 employees in June last year. dismissal About 950 employees earlier this month.

Coinbase’s stock price plummeted as the price of digital assets plummeted, dropping more than 70% to $55.16 per share from $191.48 a year ago. However, Coinbase’s share price has risen 64% since his early January due to the recent rise in cryptocurrency prices.

Staking has become a growth area for Coinbase. About 11% of the exchange’s revenue came from staking in the third quarter of last year, compared with 6.2% in the same period last year. Besides Ethereum, Coinbase offers staking on Cardano, Solana, Cosmos, Algorand and Tezos.

JP Morgan analysts say Coinbase’s Shanghai fork’s potential upside is partly based on its “abnormally large” exposure to Ethereum, which accounts for about 25% of assets on the exchange’s platform. pointed out.

The investment bank claims that Coinbase’s claim that Ethereum holders will be automatically enrolled in the coin’s staking program has not yet been verified by Coinbase’s management, but that assessment follows a previous move by the company. Coinbase did not immediately respond to a request for comment.

Also, if the feature were introduced, exchange users would be able to disable staking on Ethereum, a JP Morgan analyst said it would be an unlikely decision among investors. I’m here. “Investors can opt out of the program, but few want to give up the potential return on investment they get from staking,” he said.

At the time of writing this $26 billion Since the Beacon Chain launched in December 2020, a significant amount of ETH has been pledged to the network through its staking program.

Ethereum’s upgrade in Shanghai follows the network’s successful transition to a proof-of-stake system last September. A report from the Crypto Carbon Ratings Institute found that he reduced the network’s energy usage and carbon footprint by more than 99.99%.