Experts predict Ethereum staking yields to surpass US interest rates in the next year, driving potential price growth.

Experts believe that Ethereum staking yields are expected to exceed US interest rates in the coming year, potentially encouraging investors to seek higher returns and boosting Ethereum's price. However, market dynamics are projected to narrow the gap between Ethereum staking yields and traditional risk-free rates in the coming quarters due to declining interest rates and increasing transaction fees on the Ethereum network.

Since mid-2023, the spread between Ethereum's aggregate staking rate and the effective US federal funds rate has remained negative. However, according to a report by crypto trading and institutional brokerage firm FalconX, two key factors may push the spread into positive territory by mid-2025, creating a "double-positive effect."

FalconX stated in an investor memo last Friday that the Federal Reserve's recent decision to lower interest rates is expected to continue into next year.

Data from FedWatch indicates an 85% probability that the federal funds rate will fall below 3.75% by March 2025, with a 90% probability of dropping below 3.5% by June.

The decline in US interest rates will lower yields on traditional assets like treasury bonds, narrowing the yield gap with Ethereum staking. Currently, Ethereum staking yields hover around 3.2%.

However, David Lawant, Head of Research at FalconX, said it remains to be seen how large the gap between staking yields and risk-free rates will be in a full-fledged crypto bull market.

"The only time Ethereum staking yields were significantly higher than risk-free rates for a relatively extended period was at the end of 2022, when the industry was at the bottom of the bear market following the FTX collapse."

According to YCharts data, Ethereum transaction fees reached their highest levels in almost two months last week. Subsequently, the fees dropped to an average of $0.80 per transaction on Sunday.

While current fees are significantly lower than peak levels during previous bull markets, this upward trend reflects increased blockchain activity, FalconX stated. Higher transaction fees boost staking rewards, making Ethereum staking more attractive for stakers.

FalconX believes the combination of declining US interest rates and rising Ethereum yields may push the spread into positive territory within the next two quarters, making Ethereum staking more competitive against traditional yield-generating assets.