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As crypto fans holding staked Ethereum eagerly await the next network update, crypto exchange Coinbase may also have a lot to look forward to, analysts at JP Morgan say.

The next upgrade to the Ethereum network, dubbed Shanghai Fork, is scheduled for March and will allow people to access funds previously dedicated to Ethereum’s Beacon Chain, which allows depositors to participate in transaction validation and earn rewards in the form of newly minted Ethereum.

Ethereum staking could become a major boon for Coinbase if its users are automatically signed up as they are with tokens such as Cardano and Solana, JP Morgan analysts wrote in a recent research report.

“Ethereum staking forced holders to lock their Ether indefinitely, which we saw as a big deterrent to staking ETH historically,” he said. “We believe Shanghai Fork could usher in a new era of staking for Coinbase.”

The investment bank estimates that 95% of retail investors on Coinbase could participate in Ethereum staking after the Shanghai fork, which could net the exchange between $225 million and $545 million in revenue per year.

Currently, Coinbase users are required to agree to stake their Ethereum as there is no way for them to access the deposits or ETH they were rewarded with, which Shanghai Fork will address. JP Morgan estimates that the exchange is already earning around $50 million a year from Ethereum staking.

The extra revenue could bring Coinbase some warmth amid the current crypto winter. The exchange announcement its operations in Japan would soon end last Wednesday. The exchange has also downsized twice in the past year, laying off around 1,100 employees in June last year and fire about 950 employees at the beginning of the month.

Coinbase’s share price fell alongside a sharp drop in the price of digital assets, falling more than 70% to $55.16 per share from $191.48 a year ago. However, a recent rise in crypto prices has sent Coinbase shares up 64% since early January.

Staking has become a growth area for Coinbase. About 11% of the exchange’s revenue in its fiscal third quarter last year came from staking, compared to 6.2% in the same period a year earlier. Besides Ethereum, Coinbase offers staking for Cardano, Solana, Cosmos, Algorand, and Tezos.

JP Morgan analysts noted that the Shanghai Fork’s upside potential for Coinbase is partly based on the exchange’s “unusually large” exposure to Ethereum, which comprises about 25% of the assets on the exchange’s platform.

The investment bank has warned that its thesis that Coinbase Ethereum holders would automatically be enrolled in the coin’s staking program has not yet been verified by Coinbase management, but that its assessment is based on previous movements. carried out by the company. Coinbase did not immediately respond to requests for comment.

And while users of the exchange could prevent their Ethereum from being staked if the feature is introduced, JP Morgan analysts said it would be an unlikely move among investors. “While investors can opt out of the program, we see few willing to forgo the potential investment income generated from staking,” he said.

At the time of this writing, $26 billion value of ETH has been pledged to the network through its staking program since the launch of the Beacon chain in December 2020.

Shanghai’s Ethereum upgrade follows the network’s successful transition to a proof-of-stake system in September last year. A report by the Crypto Carbon Ratings Institute found that the network’s energy consumption and carbon footprint had fallen by more than 99.99%.

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