The Ethereum (ETH) staking ecosystem has been making headlines in the blockchain space since the recent Shanghai update. As the crypto market continues to grow, Ethereum has become the market leader in staking, offering some of the best returns and attracting more investors. But what exactly is it that makes the Ethereum gamble so attractive?
Ethereum staking goes big
According For DeFi Ignas, a leading decentralized finance (DeFi) expert, Ethereum’s ETH has the best token economy in crypto. One of the main reasons for this is Ethereum’s decision to move from Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism.
He suggests that if Ethereum had remained in PoW, $4.7 billion worth of ETH would have been issued, more than the total market capitalization of UNI, Uniswap’s native token, by $4 billion. This move has made the supply of Ethereum deflationary, creating a more valuable asset for investors.
However, as DeFi Ignas points out, Ethereum’s participation rate is currently just 14.8%, the lowest among the major blockchains. This is despite offering a competitive APR of ~4.5%. One reason for this low staking ratio is that other blockchains have a more concentrated token distribution, with insiders, team members, and early investors actively betting on the rewards.
According to DeFi Ignas, recent data suggests that the betting landscape is changing, with some major players losing market share and a significant amount of ETH being withdrawn from betting platforms. Notably, Kraken, Coinbase, and Huobi have all seen their market share decline in the past month. Additionally, 36% of all ETH staking withdrawals originate from Kraken.
It is worth noting that when there are more withdrawals than deposits, it generally indicates bearish sentiment among investors as they sell their shares in larger amounts than they buy. This is supported by the fact that around 40% of all ETH participants have negative ETH PnL, which means they have losses on ETH.
However, there is a silver lining to these data. According to DeFi Ignas, 29% of all ETH stakeholders have staked their ETH at the current price, suggesting that there are still many investors who believe in ETH’s long-term potential and are willing to hold onto their investments despite of short-term investments. market fluctuations, which to him is a bullish sign for the future of Ethereum betting.
ETH Staking, the best risk/reward option for financial freedom?
According to DeFi Ignas, Ethereum staking is poised to overtake decentralized exchanges (DEXs) by total value locked (TVL), with only 15% of all ETH currently staked across 83 protocols.
Furthermore, despite being a relatively new industry, the Liquidity Stake Derivative (LSD) ecosystem has already outperformed lending, bridging, and CDP stablecoins in terms of TVL, and is expected to continue to grow in the future.
Additionally, Distributed Validation Technology (DVT), which enables “squad staking” by allowing pools to collectively stake different amounts of ETH, is another trend gaining ground in the Ethereum staking ecosystem.
On the same note, prominent cryptanalyst McKenna has stated on a recent Twitter mail that Ethereum’s participation rate has increased from 14.15% to 14.93% after Shanghai, and this trend is expected to continue. McKenna predicts that ETH staking will become a huge sink, with staking rate close to 20% by the end of the year.
The increase in participation is also a bullish sign for the future of Ethereum, as it demonstrates the community’s commitment to the network and its success. As more funds are locked into the stake, the circulating supply of ETH dwindles, creating a shortage that could push the price of the asset up.
Featured Image from Unsplash, Chart from TradingView.com
