Ethereum (ETH) will likely cross $10,000 by the end of the year, said Arthur Hayes, the co-founder of crypto exchange BitMEX. He said ETH’s impending shift to a proof-of-stake (PoS) model would make it resemble a bond, which has the potential to greatly increase its institutional appeal.
Hayes said at least a quarter of his portfolio consists of ETH, and that he intends to increase his exposure ahead of the token’s widely anticipated shift. ETH was last trading near $3,500- its highest level so far this year.
PoS to make Ethereum a bond?
The Ethereum blockchain is set to merge its 2.0 and 1.0 chains some time this year, following which the token is expected to adopt a PoS mechanism- one which rewards staking, instead of mining. Initial projections show that ETH’s annual returns in such a model could be as much as 11%- much higher than anything offered by conventional debt markets, Hayes wrote in a blog post.
He expects the potential returns to attract a vast amount of institutional capital, catapulting ETH prices to new highs this year.
When the dust settles at year-end, I believe ETH will be trading north of $10,000.
Staking in the token would operate similarly to placing money in a time-bound debt instrument, with both activities providing almost no risk. To institutional investors, bonds represent steady, safe returns over a long period of time.
Citing low borrowing rates, Hayes said it would theoretically be possible to leverage inexpensive U.S. dollar loans into staking ETH for the returns, while still preserving most of the bumper 11% margin.
As global real rates are deeply negative, I want to own an asset that has a positive yield in its own currency — and at the moment, that is ETH.
ETH’s recent rally fuelled by PoS anticipation
The world’s second-largest cryptocurrency has already seen positive price action in anticipation of its PoS shift. The token surged around 16% through March, and was last trading at its highest level this year, near $3500.
The PoS model is expected to nearly negate ETH’s computational and energy requirements, bringing it further in line with regulations that scrutinize crypto’s high environmental cost. The move also makes the token more accessible to enthusiasts who lack the hardware to mine.
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