Examining the Exploding Interest in Ethereum Staking

The Ethereum merge is now 250 days old, and the demand for staking ETH has continued to increase. Also, due to the Shapella upgrade last month, which permits the withdrawal of staked ETH, demand for validators on the Ethereum network has increased dramatically.

At the very early stage of the Shapella upgrade, the Ethereum network saw a substantial outflow of validators who decided to stop staking and leave the network, leading to the withdrawal of almost 1 million ETH in the first few weeks. To this effect, the network implemented a validator exit/entry cap of 1,800 per day to handle this circumstance, which contributed to the maintenance of orders during the validator departure process.

Although these exits received a lot of attention, by early May, the departure line was essentially empty. The admission line has increased, and at this time there are about 64,000 validators waiting to enter the network.

The flow of ETH into staking contracts improved once the exit queue was cleared. Since the Shapella upgrade, 2.8 million ETH have been withheld, but that number has been easily surpassed by the 4.3 million ETH that is now streaming into staking contracts. Additionally, there has been a surge in the number of unique depositor addresses staked, indicating the emergence of a new market sector.

Additionally, as a result of increased on-chain activity, validators have witnessed a spike in yield. As a result, fees have gone up, which is good for validators who get some of their staking return from the transaction fees the Ethereum network generates. Validator yields have recently dropped to the 6% area after formerly approaching 8%.

Key Takeaways for Investors: The network is becoming more robust as a result of the rising interest in Ethereum staking. The line of awaiting validators suggests that this trend won’t be changing any time soon. We think ETH is still one of the better cryptocurrency investments for the long term.

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