The cost of Ether has been increasing over the past month, despite a global decline in cryptocurrency prices. At the time of writing, the price of the native token of the Ethereum blockchain was $1889.96, up from roughly $1300 in July.
What is the reason for the dramatic increase?
Reportedly, Ethereum is set to switch to the proof-of-stake mechanism on September 15-16, 2022 – an event popularly known as the ‘Ethereum merger’. Investors are thrilled with the prospect of their profits increasing twofold after the merger, despite the fact that the major motivation for the merger is to reduce the carbon footprint of the cryptocurrency.
Staking Rewards Will Double
CoinDesk has reported that most of the investors in Ethereum are Variable Takers (VT). They are expecting the annual percentage yield (APY) to move to 8% from the current 4%, and yield them double benefits.
They are also switching from fixed rate to variable rate. Traders are anticipating these rewards through Voltz Protocol’s interest rate swap pool for Rocket’s RETH and Lido-Staked Ether (STETH).
Dune Analytics has estimated that the VTs made $10 million in notional trading amount between these two pools. The amount makes for 82% of the notional trading amount of $12 million. Both pools have been around from the 1st of July 2022 and will expire together this December end.
The Voltz Protocol has been in the market for almost two months, allowing traders to create a market for any variable rate of return. Furthermore, given where they are holding Ether as margin, investors in the STETH and RETH pools can be settled for variable returns or vice versa. To get started, traders do not need to bet on Lido’s Ethereum STTH or Rocket’s RETH. There are Fixed Takers (FTs) who are exchanging fixed rates for variable rates. At the same time, variable takers are buying variable rate exposure.
Speaking to CoinDesk, Woltz Protocol CEO Simon Jones said that investors are expecting Ethereum to see the yield at variable rates rise strongly. He also noted that the development of the decentralized finance (DeFi) interest rate swap market could accelerate upmarket maturity.
