The Ethereum ETH/USD network launched its Beacon Chain in December 2020 which enabled Ethereum to be deposited and staked on its proof of stake chain. Ether deposited on the beacon chain will facilitate the adding of blocks to the blockchain, storage of data, and processing of transactions.
An individual validator needs 32 Ethereum tokens to be activated. On Dec. 1 2020, Ethereum was trading at $598.35. Since then, Ethereum rallied immensely as the market went bullish, causing new all-time highs of $4,812 earlier last year.
However, the past few months have seen a major downtrend in the crypto market, with a large-scale crash occurring last month. Thus, Ethereum is currently trading at $1,096, almost 80% below the previous all-time highs. Despite the recent plunge in Ethereum’s price, if you staked 32 Ether on a Validator Node when the testnet launched on Dec. 1 2020, your invested amount of $19,147.20 would currently be worth $35,072, after having crossed the six-figure mark earlier last year.
See Also:How to Stake Ethereum on Coinbase
At Ethereum’s all-time high, the validator would be worth $153,984. Currently, interest rates are floating according to the amounts of validators. However, following the Ethereum Merge, interest rates will be determined by the Ether staked and network usage.
If investors don’t have 32 Ethereum, numerous exchanges offer standard Annual Percentage Yields (APY), regardless of the staked amount. For example, Gemini offers a 7.4% APY while Coinbase COIN offers 5.75%, charging a 25% commission on staking rewards. However, staking across different platforms poses varying risks to investors, due to a centralized point of failure and potential illiquidity in falling market conditions.
As the Ethereum merge nears, predictions estimate the Ethereum staking reward to fall to 6-8%. However, amidst the recent market crash, institutionally staked Ethereum has caused problems for firms globally. Crypto borrowing and lending firms, such as Celsius Network CEL/USD and Three Arrows Capital (3AC), have faced large-scale insolvency caused by crashing Ethereum prices, with thousands of tokens being illiquid until the Ethereum merge later this year.
Thus, as market uncertainty continues, institutions must proceed with caution on large-scale positions, while ensuring the safety of investor funds.