Staked, a US-based tech firm that focuses on operating blockchain staking nodes and infrastructure is announcing the launch of the Staked ETH Trust. The firm says that the Trust is the “Frist investment vehicle that offers the combination of digital asset exposure as well as staking rewards.” In this case, the rewards will be generated by staking on the Ethereum 2.0 Beacon Chain.
The fund is available to accredited investors who can invest in the United States. Tim Ogilvie, Staked’s Chief Executive, told Finance Magnates that: “the minimum is $25,000,” and that: “we offer an investor onboarding portal where investors can get accredited and get access to the subscription documents.”
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Ethereum’s Staking Rewards Are Expected to Be ~8% in 2021
According to an announcement shared with Finance Magnates, the Staked trust will provide accredited investors with an avenue to access staking rewards on the Ethereum network. ‘Staking’ is the process through which ETH holders ‘lock’ their coins into the network in order to confirm transactions. In return, they receive ETH token rewards.
Ethereum’s staking rewards will be considerable: the network is expected to deliver ~8% in rewards for stakers in 2021. However, the process of staking is complex, a factor that has kept many investors from attempting it.
Therefore, access to staking rewards has been primarily limited to cryptocurrency enthusiasts who hold ETH directly and are willing and able to stake it. A number of companies have also introduced staking solutions that ETH holders can use to ease the technical burden.
”The Trust Offers an All-in-One Solution to Allow [Investors] to Participate without Deep Crypto Knowledge.”
However, until now, institutional investors have had limited regulated means of buying and holding ETH.
Just like retail ETH investors, Institutional investors may have found the process of holding and staking ETH and other Proof-of-Stake assets intimidating. Ogilvie told Finance Magnates that: “we work with lots of investors that want exposure to ETH and want to participate in staking, but it’s too complex for them.”
“They need to purchase ETH, custody it and stake it,” he explained. “That requires a lot of crypto know-how that isn’t for everyone. The trust offers an all-in-one solution to allow them to participate without deep crypto knowledge.”
Therefore, the launch of the Staked ETH Trust could be an important moment in bridging institutional investors with crypto assets beyond Bitcoin.
Why Is Staking So Important to ETH Hodlers?
While it is true that other funds have offered investors access to ETH in the past, the staking aspect of Staked’s funds makes the Trust particularly promising. This is because of the fact that Ethereum’s Proof-of-Stake algorithm has made the asset inflationary; as more ETH tokens are created to reward stakers for their work, each individual ETH token could lose a bit of its value.
In an interview with Finance Magnates conducted last year, Anchorage President Diogo Monica explained that: “Whenever you invest in a cryptocurrency that uses proof of stake, you are faced with the following situation: you have an inflationary currency.”
“There are new assets being created to pay out the people that are doing staking,” he said. “Therefore, if you’re not staking or delegating, if you’re not actively participating in the network’s security, you’re actually being diluted: your assets are being inflated away.” This, he argued, is why staking is so crucial.
“The Impact of Staking Can Be Very Impactful on an Overall Buy-and-Hold Strategy.”
Indeed, the announcement explained that: “to the extent that staking rewards exceed expenses, the trust is expected to be the only digital asset fund whose Net Asset Value (NAV) denominated in ETH will grow over time. Other funds, which charge fees but do not offer staking returns, will see a decline of such a digital asset per share ratio over time.”
Ogilvie explained that: “Yes. Anyone who holds a proof-of-stake asset has a strong incentive to stake it. The ETH inflation schedule is low, but the impact of staking can be very impactful on an overall buy-and-hold strategy. Staked’s ETH2 trust makes all of this simple.”
A number of reports have emerged this year saying that ETH was emerging as a possible point of interest for institutional investors. Ogilvie told Finance Magnates that: “I do think lots of investors are recognizing that ETH’s economic properties (EIP-1559, ETH2 staking, et al) are likely to create a very strong story as an ultra-sound money.”