Ethereum (ETH) Staking Model Can Be Broken by FED By U.Today

U.Today – The Federal Reserve’s potential impact on staking model has recently become a topic of discussion, particularly following comments from Mark Harvey. Harvey argues that the Federal Reserve could “break” ‘s staking model by raising interest rates, thereby making traditional financial instruments like 10-year Treasury bonds more appealing than staking .

According to Harvey, the “crowding out effect” could come into play if the Federal Reserve continues to hike interest rates. Currently, the 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 a “risk-free” 10-year Treasury bond that offers a higher yield or opt for the “risky Ethereum staking Ponzi scheme” with a lower yield.

Inflation vs. Deflation

While Harvey’s argument might seem compelling at first glance, it is essential to consider that his views are largely speculative and not universally accepted. One significant counterpoint is that many investors who stake are not necessarily looking to switch to government bonds, even if they offer higher yields.

Source: The reason? Inflation. Payouts from Treasury bonds are still subject to inflation, which can erode the real value of returns over time. On the other hand, claims to have a deflationary model due to its continuously reducing supply, especially following the implementation of EIP-1559, which burns a portion of transaction fees.

Different investment philosophies

Moreover, the type of investor who is attracted to cryptocurrency staking and the type 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.

This article was originally published on U.Today