JPMorgan claims greater revenue opportunity for Coinbase with Ethereum Staking

Analysts at prominent investment bank JPMorgan believe that Coinbase will benefit significantly from the upcoming merger. In a note to clients on Wednesday, analyst Kenneth Worthington said the San Francisco-based crypto exchange has taken concrete steps in an effort to maximize the value of ETH staking for its clients.

This should result in higher revenue generation itself. Worthington asserted,

“We see the staking revenue opportunity larger (proportionately) than the revenue opportunity given that we expect institutional staking clients to contribute significantly to Eth’s staking revenue, but much less for clients institutional. The vast majority of the economy remains with retail,”

High hopes for Coinbase

Despite its IPO last year, Coinbase has struggled to maintain momentum during intense market volatility. According to its second-quarter results, the exchange posted a loss of $1.1 billion on revenue of $803 million. Notably, both numbers fell short of analysts’ expectations. Its earnings fell nearly 64% as investors exited the crypto market after last year’s dramatic run.

But the merger, scheduled for mid-September, could prove significant for the exchange. Currently, the company has a 15% market share of Ethereum assets. This will give Coinbase a competitive edge in this space, the New York-based investment bank claims. Coinbase’s new institutional staking product and its CEO, Brian Armstrong, said it expects it to benefit its business model.

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

According to Worthington estimates, the exchange can potentially generate additional annual Ethereum merger staking revenue of $650 million with Ether’s price at $2,000 and a 5% yield in ETH. “We are seeing an additional $80 million to $100 million annually in staking revenue,” Worthington added.

“We estimate Coinbase’s incremental annual staking revenue from the Ethereum merger at $650 million based on $2,000 Eth and an Eth yield of 5%. We see an additional annual revenue of $80-100 million in staking revenue.

Institutional staking: a “phenomenon”

Coinbase CFO Alesia Haas recently guaranteed that institutional staking of cryptocurrencies, including post-merger Ethereum, could potentially become a “phenomenon” in the future. On the second-quarter earnings call, however, the executive said it was still a “newbie” to its new staking service.

As such, any “actual hardware impact” can only be seen after a liquid staking option for Ethereum post-merger was created.

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