JPMorgan analysts, led by Nikolaos Panigirtzoglou, are concerned about Ethereum’s recent surge in staking, which has led to increased centralization and a decline in staking yields.
They noted that the rise in Ethereum staking following the Merge and Shanghai upgrades has come at a cost, making the network more centralized, and reducing overall staking yields.
Liquid staking providers, including Lido, played a significant role in this growth, with the top 5 providers controlling over 50% of Ethereum staking.
JPMorgan raised concerns about the risks of centralization, including potential collusion and vulnerabilities. They also highlighted concerns about rehypothecation and declining staking rewards compared to traditional financial assets.
Furthermore, Ethereum’s staking growth has led to declining staking rewards compared to traditional financial assets’ increasing yields. The analysts noted that “The total staking yield has declined from 7.3% before the Shanghai upgrade to around 5.5% currently.”
Additionally, JPMorgan noted Ethereum’s underperformance in terms of network activity after the Shanghai upgrade, with declines in daily transactions, active addresses and total value locked in DeFi protocols.
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