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As the world of cryptocurrencies develops, Ethereum (ETH) investors are beginning to pay attention to the power of returns and their potential impact on the cryptocurrency space. Yields are essentially the payments that investors receive for owning cryptocurrencies, and they can take many forms and forms.
How ETH yield could revolutionize the cosmos
One of the most important things to understand about returns is that they exist on a risk curve. This means that the percentage of return paid to investors is a function of supply and demand, as well as the perceived risk associated with the cryptocurrency in question.
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For example, a cryptocurrency with limited supply and high demand is likely to have higher returns than a cryptocurrency with high supply and lower demand. Similarly, a cryptocurrency that is perceived as less risky is likely to have higher returns than one that is considered more risky.
According to cryptocurrency analyst and researcher Adam Cochran, this is where the potential of cryptocurrencies really shines.
I think most people in cryptocurrency don’t fully understand or appreciate yields and what it can mean for the cryptocurrency space at large – as it’s one of the things that gets me incredibly bullish on the space.
And it’s part of why I think ETH still has a 20x+ in its future.
— Adam Cochran (adamscochran.eth) (@adamscochran) May 15, 2023
By creating non-dilutive returns through fees, cryptocurrencies can offer investors a way to generate passive income without the risk of inflation. This is especially important in a world where traditional investments, such as savings accounts and bonds, generate little or no income.
One cryptocurrency that is particularly well-suited to take advantage of the yield advantage is Ethereum. Thanks to its growing ecosystem of decentralized applications and smart contracts, ETH can generate significant fees for investors through its use as a platform for decentralized finance (DeFi) applications, Cochrane said.
For example, ETH staking currently offers returns in the 5-7% range, while Synthtetix (SNX) staking can generate returns of up to 24% from outside fees. Similarly, Curve (CRV) staking can generate up to 15% in revenue from crvUSD fees. This means that billions of dollars of capital can now generate returns in excess of 3% Annualized Percentage Yield (APY), a significant opportunity for investors.
This is especially important in a world where traditional investment opportunities such as savings accounts and bonds generate little or no income. As more investors become aware of the potential of cryptocurrencies to generate high returns with an acceptable level of risk, this may likely generate more interest and investment in this area.
From HODLing to Concession
In a recent post, Adam Cochran emphasized the importance of focusing on asset performance and real returns in the cryptocurrency space. Despite the current notion that fundamentals don’t matter and memes and rhetoric dominate the market, Cochran believes that one day the true value of assets will become apparent.
Those who already own assets have an advantage, Cochran said, as they can enjoy significant capital gains in addition to 2% per annum of the asset’s face value. This is especially true in the cryptocurrency space, where prices can be extremely volatile and subject to sudden fluctuations.
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In addition, Cochran predicts that as larger and larger funds begin to recognize the long-term potential of the cryptocurrency space, they will begin to invest heavily.
This capital influx will fundamentally change the financial industry, and those who purchased a significant amount of coins prior to this shift will benefit.
ETH after the market recovery on the 1-day chart. Source: ETHUSDT on TradingView.com.
Featured image from Unsplash, chart from TradingView.com