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JPMorgan Sees Coinbase Benefitting from Upcoming Ethereum Shanghai Update

source-logo  coinspeaker.com 23 January 2023 09:14, UTC

JPMorgan believes as many as 95% of Coinbase Global’s retail customers will opt in for the staking service after the Shanghai update.

Ahead of the upcoming Shanghai Update of the Ethereum network, analysts at American multinational investment bank, JPMorgan Chase & Co (NYSE: JPM), are optimistic that Coinbase Global Inc (NASDAQ: COIN) will be among the major beneficiaries.

With the Shanghai update scheduled to go live in March, investors will be able to withdraw their staked Ethereum, some going as far back as December 2020 when the deposit address for the Beacon Chain was first published. The protocol has transitioned into Proof-of-Stake (PoS) and the staking of ETH makes it possible for transactions to be validated. Typically, stakers earn a reward for their investments.

According to JPMorgan, this event will benefit Coinbase as it can enroll its users for staking automatically, thus making it possible to earn staking rewards from them. It is worthy of note that if this assumption holds true, the analysts projected that Coinbase can earn a staking revenue in the range of $225 million and $545 million per year.

“Staking in Ethereum forced holders to lock up their Ether indefinitely, which we have viewed as a big dis-incentive to stake ETH historically,” it stated. “We think the Shanghai Fork could usher in a new era of staking for Coinbase.”

According to the analysts, Coinbase has not come out to openly declare its customers will be enrolled for the staking service automatically. However, they noted that their assumption is based on prior moves by the crypto trading platform which also supports staking for Cardano (ADA), Solana (SOL), and Tezos (XTZ) amongst others.

As part of its expectations, JPMorgan believes as many as 95% of Coinbase Global’s retail customers will opt in for the staking service after the Shanghai update. They assumed this because they believe users may find it difficult to forgo the reward that is associated with staking their coins.

Will Coinbase Trail the Path Set by JPMorgan?

The digital currency ecosystem has been on a very tight leash for the past few years and Coinbase recorded a significant pullback in both its earnings, share price, and overall performance sentiment.

While it remains a wide guess as to whether Coinbase will trail the path set by the JPMorgan analysts, one thing is certain, and that is the fact that the exchange needs a very defined approach to solving its current liquidity and profitability woes.

Over the course of the past year, Coinbase has been cutting costs as showcased in the retrenchment of about 2,050 employees citing the harsh market conditions as reasons for the layoff. The exchange requires swift intervention in order to return to its glory days and JPMorgan experts believe one of the easiest avenues to do this is via its staking program.

Coinbase stock has been rejuvenated for the better part of this year, and it closed Friday’s session up 11.61% to $55.16.