Ether Staking Yields Jump Up to 25%; All-Time High Since Merge

Just staking ether on Lido is paying out 10% annualized, while a more elaborate move bumps yield to as much as 25%.

AccessTimeIconNov 17, 2022 at 7:18 a.m. UTC
Updated Nov 17, 2022 at 4:14 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Staking vanilla ether (ETH) is generating eye-catching yields for crypto hopefuls amid a broader market crisis with returns on most fixed-income crypto products dropping as low as 0%.

Operations at centralized crypto lending companies such as Genesis and Circle were caught in the contagion risks stemming from the downfall of crypto exchange FTX in the past few weeks. Withdrawals have been paused at Genesis, while yields on clients’ stablecoin deposits at Circle have dropped to 0%.

The decentralized finance (DeFi) market is muscling on. Users simply staking staked ether (stETH) at staking service Lido are earning as much as 10.7% – an all-time high since the Merge event – with even higher returns for holders as the value of stETH increases.

stETH is a token representing an equivalent amount of ether that has been staked. Staked tokens are locked up for an extended period to provide liquidity for staked ether.

Yields of stETH have jumped to all-time highs since the Merge. (Delphi)
Yields of stETH have jumped to all-time highs since the Merge. (Delphi)

“Recently, the liquid staking protocol also had to increase rebasing oracle limits from 10% to 17.5% to let the increased rewards flow to stETH token holders,” analysts at Delphi Digital said in a Friday note. Rebasing, or elastic, tokens are cryptocurrencies that automatically adjust supply levels to maintain a constant value.

The increased rewards have led to related borrowing strategies offering yields of as much as 25.5% on the Interest Compounding ether product (icETH) offered by Index Coop.

As a result of the increased rewards, the yield earned by recursive borrowing strategies such as icETH has also reached an all-time high of 25.5% since the Merge. It stands at 24.05% at writing time.

The Interest Compounding ETH Index (icETH) enhances staking returns with a leveraged staking strategy. The strategy uses a user’s stETH tokens as collateral on DeFi lending service Aave to borrow wrapped ether (WETH) – a token that tracks ether – that is in turn used to purchase additional stETH tokens.

This effectively leverages the amount of collateral supplied to Aave and uses that to increase yield for traders.

Data shows some $21 million worth of icETH tokens are currently on the market, with $12 million put to use on Aave to generate additional yields for holders.

However, there are some caveats to these high yields.

“Apart from smart contract risk, investors in icETH need to consider the liquidation risk from borrowing ETH from Aave and interest rate risk from the spread between borrowing cost and staking return,” Delphi analysts said.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Shaurya Malwa

Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.