As the 10-year US Treasury Yield hits the highest levels since 2007 impacting risk-ON assets like equity and crypto. However, a close analysis reveals that the surge in Treasury yield has impacted the world’s second-largest crypto Ethereum more than Bitcoin.
Ethereum Underperforms US Treasury Yields
Ethereum offers crypto investors the opportunity to earn staking rewards by staking their ETH holdings on the Ethereum network. However, the staking payout on these pledged tokens has dropped to an annualized 3.5%, nearing the lowest level in at least 10 months and significantly below a recent peak of over 8%.
This return also falls below the 5% yields provided by US government bonds, which are foundational to the traditional financial system. This discrepancy highlights how the allure of the sometimes highly volatile cryptocurrency market has waned due to the shift away from the ultra-low interest rates that were prevalent during the pandemic.
Ether’s year-to-date increase of 32% falls behind Bitcoin’s impressive 77% rally during the same period. Over the past month, a period marked by a roughly 50 basis point increase in the US 10-year Treasury yield, Ether saw a decline of more than 5%, while Bitcoin registered an 8% gain
ETH Staking Becomes Less Attractive
Ether staking surged in popularity following the Ethereum network upgrades that began in September of the previous year. Platforms like Lido and Rocket Pool, which facilitate more accessible access to staking rewards, have emerged as the dominant category within the decentralized finance sector of the crypto industry. In a note this month, JPMorgan Chase & Co. strategists including Nikolaos Panigirtzoglou wrote:
“The increase in staking has reduced the attractiveness of Ethereum from a ‘yield’ perspective, especially against a backdrop of rising yields in traditional financial assets”.
The quantity of staked Ether coins recorded a significant decline, falling by 67% to 1.2 million in September as compared to the figures reported in May. This data comes from a Dune Analytics dashboard provided by 21Shares AG, an issuer of exchange-traded products.
At press time, the Ethereum price is up 2% amid a surge in the broader crypto market. On the upside, $,1600 will be a crucial resistance for Ethereum to break However, with the ETH active addresses surpassing 100 million, there could be a turnaround ahead.
