The analysts predict that the switch from PoW to PoS could mitigate the opportunity cost of owning cryptocurrencies compared to other investments. Ether (ETH) will remain volatile, even using either PoW or PoS, and further concerns may arise.
There is a lot of expectation in the cryptocurrency market due to the upgrade to Ethereum 2.0. Many expect greater energy efficiency to run activities on its blockchain, which would lead to increasing popularity.
Some people, who include JPMorgan CEO Jamie Dimon, remain wary about this. However, two senior analysts from that company support the first argument in a recent report on the future of Ethereum.
Although the CEO expressed that opinion, it does not mean that JPMorgan has not researched cryptocurrencies before. For example, the bank dabbled in this sector in 2018 and even launched its stablecoin JPMCoin in 2019.
For that reason, some of its analysts are dedicated to finding out and making forecasts about the future of various cryptocurrencies. In this case, JPMorgan analysts make predictions about the Ethereum 2.0 proof-of-stake (PoS) upgrade. They assume that it will gain traction as a source of income for both institutional and retail investors.
Report from JPMorgan Analysts on the Future of Ethereum
The Bitcoin and Ethereum networks currently use the proof-of-work (PoW) consensus mechanism to ensure the validity of all transactions. However, this protocol does not have the best scalability and also consumes a lot of energy.
For that reason, Ethereum is moving from PoW to PoS, where investors lock their funds in exchange for rewards.
Such a change will boost the adoption of the alternative consensus mechanism after the launch of Ethereum 2.0 occurs, the authors predict. JPMorgan considered this possibility, and it was also one of the underlying reasons to develop the Ethereum upgrade.
According to the report, returns through proof of stake can mitigate the opportunity cost of owning cryptocurrencies compared to other investments. The latter include other asset classes such as US dollars and US treasury bonds.
It is just a matter of waiting to see what will happen, as the launch of Ethereum 2.0 should take place 2022. The report notes that the current market capitalization of PoS tokens exceeds USD 150 billion.
Things to Keep in Mind despite JPMorgan Analysts’ Views
Regardless of what the JPMorgan analysts reported, it is essential to remember that Ethereum is part of a volatile market. The volatility of this crypto asset will continue to exist, even using either PoW or PoS, and more concerns may arise along the way.
As the cryptocurrency market matures and volatility decreases, staking is likely to become a more reliable source of income. JPMorgan analysts considers that the Ethereum 2.0 upgrade has the potential to boost cryptocurrency adoption.
The second-largest cryptocurrency on the market is currently trading at around USD 2,300 and has accumulated 4.1% in the last 24 hours. Furthermore, its market capitalization has reached about USD 271 billion, according to data from CoinGecko.
By Alexander Salazar
