ETH Staking Yields Expected to Outperform the US Interest Rate in 2025

As 2024 winds down to a wrap, price experts have wasted no time in forecasting the relationship between Ethereum staking prices and the US interest rate. Should ETH’s staking prices go above the interest rate, the price of ETH is expected to surge significantly, thus a delight for Ethereum investors. The disparity between conventional risk-free interest rates and ETH staking yields are set to close up due to transitions in the crypto market space. These transitions are influenced by plummeting national interest rates and the increase in the cost of transactions on the Ethereum framework. 

It is worth noting that the Effective Federal Funds Rate and the Composite Staking Rate share a spread that has failed to break into the positive zone since the middle of 2023. However, according to FalconX, a firm known for their crypto trading operations and institutional brokerage services, it is believed that the spread is likely to break into the positive zone by the middle of next year.

FalconX outlines two possible reasons why that might happen. One of such reasons is the recent interest rate cut on September 18 by the Federal Reserve. Interestingly, analysis on futures markets predicts an 85% likelihood that by March 2025, interest rates will go lower than 3.75%. The analysis also predicts that by June, there is a 90% likelihood that the interest rate will go even lower to 3.5%. The impact of the lowering interest rates also reflects on traditional assets, lowering their yield and shortening the spread with ETH staking yields, with ETH yields currently at 3.2%. 

The second reason why the spread may break into the positive zone is the rising value of Ethereum transaction fees. Transaction fees play a key role in determining staking yields and in the previous week the transaction fees of Ethereum soared higher than it ever had in about two months. Although the fees dropped to about $0.80 on the average this Sunday, the uptick is a sign that blockchain activities will increase as things progress. As transaction fees increase, Ethereum staking yields would go up too presenting a favourable market condition for staking yield investors.

Considering both factors, a rise in Ethereum’s transaction fee and a decline in the Federal Funds rate may see ETH’s staking yield outperform the US interest rate before the middle of next year.