By mid-2025, the Federal Reserve’s Fed key rate is expected to fall below the yield from staking in Ethereum, potentially boosting the price of the second-largest cryptocurrency by market capitalization. This conclusion was reached by FalconX.
The spread between these two parameters has remained negative since mid-2023. At the end of 2022, following the collapse of FTX, the opposite situation was observed.
Futures market traders anticipate a reduction in the Fed’s key rate to 3.5% by June 2025 with a 90% probability. On September 18, the Federal Reserve lowered its range by 50 basis points to 4.75-5%. At the time of writing, the staking reward for the second-largest cryptocurrency by market capitalization is estimated at 3.19%.
“It remains to be seen how attractive staking will be compared to the risk-free rate amid a full bull run in Ethereum,” the report states.
Recently, amid a revival in on-chain activity, the average fee on the network of the second-largest cryptocurrency by market capitalization surged to its highest level in nearly two months. This metric’s increase leads to higher staking yields.
Transaction fees still account for only 10-20% of the levels observed during the previous two bull markets.
“Improving staking yield dynamics could become a powerful supporting factor for the asset’s price recovery,” experts concluded.
In July, the SEC approved S-1 filings for spot Ethereum ETFs. These exchange-traded funds do not provide staking rewards. Hester Peirce of the Commission assured at the time that “any feature of the products is always open for review.”
On September 28, the asset volume in BlackRock’s iShares Ethereum Trust exceeded $1 billion.
During the past reporting week, ETH-ETFs attracted $84.5 million, breaking a streak of outflows since mid-August.