ARK Invest Says stETH Is Becoming a Key Reference for Crypto, Like the Fed Funds Rate

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As a seasoned crypto investor with a knack for spotting trends and understanding the underlying fundamentals, I find Lorenzo Valente’s research on Ether (ETH) particularly insightful. Having navigated through various market cycles, I can attest to the importance of yield-bearing assets in a digital economy, and ETH certainly stands out among its peers.

On the 15th of October, Lorenzo Valente, a researcher at ARK Invest, shared a study titled “The Exceptional Qualities of Ether Among Digital Currencies.

ARK Invest’s research emphasizes that staked Ether, denoted as stETH, plays a crucial role within Ethereum‘s Proof-of-Stake (PoS) framework. According to their findings, Ether (ETH) is the unique digital asset that generates returns when staked, thereby emerging as a significant benchmark or “reference indicator” in the digital assets market.

As stated by Valente, Ethereum (ETH) holds a crucial position in both private and public financial markets. It shapes monetary policies within other digital networks and acts as an indicator of the overall well-being of the cryptocurrency market. He emphasizes that with a market cap of approximately $315 billion and millions of active users each month, Ethereum handles substantial economic value.

As an analyst, I’ve observed that just as the Fed Funds Rate is a significant indicator for economic cycles in traditional finance, Ethereum (ETH) staking yield is emerging as a crucial metric for gauging smart contract activity and economic cycles within the digital asset space, according to ARK.

According to ARK’s findings, liquid staking derivatives (LSDs), such as Lido’s stETH, enable users to keep their Ethereum (ETH) staked while retaining the flexibility of having liquid assets. The research indicates that this tokenized stETH can be exchanged, employed as collateral in decentralized finance (DeFi), or reinvested for higher returns on platforms like Eigenlayer. As per reports from mid-July 2024, it appears that approximately 31% of the total stETH supply was secured within DeFi protocols, including Aave, MakerDAO, and Spark.

The text further explains that Ethereum’s shift to Proof of Stake and the adoption of EIP-1559 have resulted in ETH becoming scarcer, thereby boosting stETH’s importance as premium collateral. Meanwhile, the staking return acts as a crucial gauge of the crypto market trends.

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2024-10-18 11:39