APR Forecast July 2024

Matan Hamburger
July 1, 2024
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Disclaimer: Twinstake does not provide staking services to retail customers. This article analyses staking rewards data for Twinstake-supported crypto assets and provides Twinstake’s opinion on their 3-month projection. The information in this document is not intended as a promotion, offer, invitation or solicitation for the purchase or sale of any investment, nor is it intended to give rise to any other legal relations whatsoever and must not be relied upon for the purposes of any investment decision. Any forward-looking projection is purely representative of Twinstake’s opinion. If you do not have the relevant professional experience in matters relating to crypto asset investments, you should not consider this article to be directed at you. Twinstake shall have no liability for any loss or damage that may arise directly or indirectly from the use of or reliance on the information provided in these projections. 

In this article, we provide an analysis of the current staking rewards rate for Twinstake-supported crypto assets, offering insights into their performance over the past quarter as well as projections for the next three months. By examining key factors such as staking capitalization, inflation rates, and network utilization, we aim to provide a comprehensive overview of Twinstake’s expectations over the coming quarter.

Executive Summary:

  • Twinstake expects the staking Annual Percentage Rate (APR) on ETH is to drop by 11 basis points (bps) to 3.55% due to anticipated increased staking market capitalization
  • The staking APR on Solana is likely to remain at 7.77% through Q3 2024, driven by high JITO MEV (Maximal Extractable Value) offset by the reducing inflation
  • Increased staking demand moderated by increasing network utilisation are set to steer Toncoin’s staking APR toward 3.58%, a drop of 0.35% on the current APR
  • MATIC’s reward schedule update due in July 2024 is expected to reduce the staking APR by a ¼ to 3.72%. The subsequent likely drop in staking rates (percent of total supply staked) is likely to revert some of this drop as Q3 progresses
  • A recently approved proposal triggered a substantial decrease in Dymension's APR, which is expected to continue, further lowering the APR from its current rate of 8.01% to 4.64%
  • All other assets are likely to maintain similar staking APRs to those seen during Q2 2024

During Q2 2024, the staking APR on Ethereum has fallen 31bps from 3.92% to the current rate of 3.61%. 

The Consensus layer APR fell by 10bps due to the continued swelling of the validator set. Interestingly, during Q2 the surprise approval of several ETH spot ETPs resulted in a temporary dip in the amounts of ETH being staked, likely resulting from the need for liquidity in the run up to the decision. Subsequently, staking demand increased driving the total ETH staked to 32.8M ETH ($109Bn), equivalent to 27.31% of the total ETH supply and the highest historical value staked on Ethereum. 

Twinstake’s APR obtained from MEV has decreased from 0.95% to 0.74%, likely driven by reduced gas prices on Ethereum in Q2 2024. Moreover, with an increased validator set, the finite amount of MEV created is split across a larger amount of stake, reducing the MEV payments received per ETH staked. 

As Q3 2024 progresses, the APR is likely to fall further. There will likely be a continued increase in institutional interest in ETH, combined with higher demand from retail holders as higher APRs from restaking on the likes of Eigenlayer may attract further retail capital. We believe these market factors will drive the amount of ETH being staked to reach 1.1M validators, the equivalent of 34.6M ETH. The result is an anticipated reduction in APR by 11bps to 3.55%.

The APR on Solana remained fairly stable during Q2. The rewards obtained from inflationary issuance remained range-bound between 6.67% and 7.79%; APR  volatility was primarily driven by varying block times. Over Q2 2024, Solana’s price trended downward, however there was little evidence of this directly impacting staking demand. The staking rate remained at similar levels seen in early April 2024 of around 63%, whilst the inflation rate continued its predefined gradual decline reaching 5.19% by June 27th 2024 from 5.37% at the outset of Q2. Therefore, The average APR remained close to the APR in Q2 at 7.17%.

From the beginning of February 2024, the market saw a significant increase in JITO MEV rewards, adding between 60 to 120bps to stakers’ overall rewards. Thus the current total APR on SOL fluctuates at around 7.83%.

Looking toward the end of Q3 2024, we expect an APR of 7.77%, decreasing slightly due to the anticipated reduction in inflation rate.

TON has seen massive growth both in terms of network utilization as well as staking activity. The number of daily transactions processed on TON has increased five-fold since January 2024, reaching an average of 4 million transactions per day. Since the beginning of the year, the amount of TON staked has increased by over 30% from 420M TON to over 600M TON. When combined with the price increase from $2.28 to $7.34, the dollar value of staked TON has risen by 460% to $4.4Bn, and is now the 10th largest PoS (Proof of Stake) asset by staking market cap.

TON staking rewards are sourced from inflationary issuance combined with stakers receiving a share in the network transaction fees of the blocks they propose. Despite the inflationary issuance remaining constant, the amount of TON staked has grown massively. Therefore, this source of rewards has seen a decreased APR. On the other hand, the increased daily transactions have resulted in more block rewards being shared amongst the validator set. It is worth noting that a recently implemented proposal reduced the gas fees for transactions on TON by 2.5 times. However, the increase in block rewards has not proportionally reflected the increase in transaction throughput. We expect these contrasting drivers to lead to an overall reduced APR of 3.93%, compared to the 4.91% seen in early January 2024

As the adoption of TON continues, we expect the staking APR to drop by a further 35bps to 3.58%. We expect further staking activity to drive the staking market cap to 700M TON, which would reduce each staker’s share in the inflationary issuance. This may be offset by increased network utilization (more transactions per second) whereby stakers will enjoy higher revenue from transaction fees earned when proposing blocks.

During Q2 2024, Matic maintained one of the most stable staking markets among the top 15 PoS assets by staking market capitalization. The staking APR on MATIC has remained at 4.94% for delegated stakers, with primary volatility in this figure being driven by varying block times and small changes to the amount of MATIC being staked. This indicates that stakers remain steadfast in their support of the Polygon ecosystem despite the recent negative price action.

In July 2024, we anticipate MATIC’s staking rewards allocation for the upcoming year to drop by 25%, which will trigger an instant drop in APR to 3.72%. This drop in APR is likely to trigger some reduction in the total staked MATIC which will reverse some of the lost APR. We therefore expect the APR to recover to 4.10% by the end of Q3 2024.

Dymension’s staking APR is set to continue its downward trend through Q3 2024, a direct result of a recently accepted network upgrade proposal. The proposal reduced the target staking rate (the % of the total supply the network would like staked) to 50%. The inflation rate on Dymension is dynamically calculated aiming to drive the staking rate toward its ideal value, reducing the reward if the stake rate is too high and increasing it should the stake rate fall below the target rate. Since shortly after inception, the staking rate on Dymension has consistently been above 56%. The proposal therefore triggered the reduction in inflation, and consequently the staking APR. Since the proposal’s acceptance, the staking APR has fallen from 15.31% to the current value of 8.01%. 

Despite this dramatic staking APR reduction, the staking rates have not fallen significantly (only reducing slightly from 57.52% to 56.75%), demonstrating the support of token holders for the network.

Having said this, we believe that the tradeoff between APR and long-term support will be ‘put to the test’ by reducing staking APRs. We expect the staking rate to eventually fall nearer to the 50% target rate which will stabilise the APR. Although difficult to predict when this will happen, we anticipate a staking APR of 4.64% toward the end of Q3 2024.

A summary of Twinstake’s APR forecast, representing how we believe the APRs will change over the coming quarter, is shown in the table provided below. 

APRs are calculated using 30 days of daily aggregated APR data and are current as of the time of writing (26/06/2024). The APRs shown are with respect to the native token value.

The projected APR estimates are the result of a combination of mathematical forecasting, expertise regarding upcoming network upgrades, insights into the network's current state, and Twinstake’s qualitative opinion. For further information regarding how staking works, or for additional information regarding the networks supported by Twinstake, reach out to us at [email protected].

Twinstake is a leading institutional staking provider which offers unrivalled knowledge and experience of the institutional market from our founding heritage coupled with deep crypto expertise and technology from our team of core devs and industry veterans. Twinstake does not provide staking services to retail customers. If you do not have the relevant professional experience in matters relating to crypto asset investments, you should not consider this document to be directed at you.

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