© Reuters. Ethereum (ETH) Staking Pattern May Be Broken by FED
U.Today – The Federal Reserve’s potential impact on the staking model has recently become a topic of discussion, particularly following comments from Mark Harvey. Harvey argues that the Federal Reserve could “break” the staking model by raising interest rates, thereby making traditional financial instruments like 10-year Treasury bonds more attractive than staking.
According to Harvey, the “crowding out effect” could come into play if the Federal Reserve continues to raise interest rates. Currently, it stands at 4.7%, which is higher than Ethereum’s staking reward of 3.9%. In this scenario, Harvey suggests that investors face a dilemma: they can either invest in “risk-free” 10-year Treasury bonds that offer a higher yield, or opt for the “Ethereum risk Ponzi scheme” with lower yield.
Inflation versus deflation
Although Harvey’s argument may seem compelling at first glance, it is essential to consider that his views are largely speculative and are not universally accepted. An important counterpoint is that many investors who invest are not necessarily looking to move into government bonds, even though they offer higher yields.
Source: The reason? Inflation. Treasury bond redemptions remain subject to inflation, which can erode the real value of returns over time. On the other hand, it claims to have a deflationary model due to the continued reduction in its supply, especially following the implementation of EIP-1559, which burns part of the transaction fees.
Different investment philosophies
Additionally, the type of investor attracted to staking cryptocurrencies and the one who prefers traditional bonds may not be the same. Crypto investors often have a different risk tolerance and investment horizon, and many are committed to the ethos of decentralization, which is fundamentally different from investing in a government-backed financial instrument.