Traders Expect Ethereum Staking Yields to Increase 2x With “The Merge Event”

The cost of Ether has been increasing over the past month, despite a global decline in cryptocurrency prices. At the time of writing, the price of the native token of the Ethereum blockchain was $1889.96, up from roughly $1300 in July. 

What is causing the dramatic increase?

Reportedly, Ethereum is set to switch to a Proof-of-Stake mechanism on September 15-16, 2022- an event popularly referred to as the ‘Ethereum merger’. The investors are thrilled with the potential for their profit to increase two-fold after the merger is done, despite the fact that the major motivation for the merger is to lessen the carbon footprints of cryptocurrencies. 

Staking Rewards Will Double

CoinDesk has reported that most of the investors in Ethereum are Variable Takers (VT). They are expecting the annual percentage yield (APY) to move to 8% from the current 4%, and yield them double benefits. 

They are also switching from the fixed rate to the variable rate. Traders are expecting these rewards via Voltz Protocol’s interest rate swap pools for Rocket’s rETH and Lido-staked Ether (stETH). 

Dune Analytics has estimated that the VTs made $10 million in notional trading amount between these two pools. The amount makes for 82% of the notional trading amount of $12 million. Both pools have been around from the 1st of July 2022 and will expire together this December end.

The Voltz protocol has been around for two months in the market, allowing traders to build a market for any variable rate of return. Also, considering where they are placing ether as margin, investors in the stETH and rETH pools may get swapped fixed for variable return or vice versa. To initiate, traders are not required to have Lido’s staked Ethereum stETH or Rocket’s rETH. There are Fixed Takers (FTs) who are exchanging fixed rates for variable rates. At the same time, Variable Takers are purchasing variable rate exposure.

Talking to CoinDesk, Simon Jones, CEO of Voltz Protocol, stated that investors are expecting Ethereum staked yields on variable rates to grow strongly. He also said that decentralized finance (DeFi) interest rate swap market developments can quicken upmarket maturation. 

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