One of the biggest draws to staking on ethereum over the years has been the delicious APY. Stakers were being handsomely rewarded for pledging their eth tokens to help secure the network, leading to a rapid increase in the percentage of the eth supply staked. However, there has been a sharp drop in the APY, which has raised the question of whether eth is still worth staking.
ethereum Staking APY Drops to 3.5%
In an interesting turn of events, the annual APY paid to ethereum stakers has fallen to 3.5%. This was the case on the latest rewards day which took place on Sunday, October 15, and as the BeaconChain website notes, punters are now receiving 3,502% rewards per year.
This is a far cry from the 18% annual growth recorded in 2020, when the bet on ethereum began. Since then, there has been a steady decrease in the annual rewards paid to punters, although there have been points where the rewards have increased.
<img decoding="async" class="alignnone size-medium wp-image-260207 aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Staking-Rewards-Fall-to-New-Lows-–-Is-Staking.png" alt="ethereum eth Staking Rewards” width=”640″ height=”324″ srcset=”https://technicalterrence.com/wp-content/uploads/2023/10/Ethereum-Staking-Rewards-Fall-to-New-Lows-–-Is-Staking.png 640w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-17-at-12.04.14-980×497.png 980w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-17-at-12.04.14-768×389.png 768w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-17-at-12.04.14-1536×779.png 1536w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-17-at-12.04.14-2048×1038.png 2048w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-17-at-12.04.14-750×380.png 750w, https://bitcoinist.com/wp-content/uploads/2023/10/Screenshot-2023-10-17-at-12.04.14-1140×578.png 1140w” sizes=”(max-width: 640px) 100vw, 640px”/>
Source: BeaconChain
For example, on the reward day of May 5, 2023, staking rewards were 8.617% annually and 4,229 eth were paid out to stakers. However, annual rewards have failed to reach this level again and drops are the order of the day.
Sunday’s figures represent a drop of almost 60% compared to May figures. In a much shorter period of time, eth staking rewards fell 10% in October alone, after starting the month with an annual APY of 3.89%. Additionally, total staking rewards on Sunday amounted to 2,645 eth, compared to 2,855 eth at the beginning of the month.
Is it still profitable to stake eth?
Staking eth to become a validator on the ethereum network does not require high computing machines like bitcoin. As such, the overhead costs to become a validator on the network are little to none, especially with liquid staking protocols making it much easier for users.
So despite the APY decrease, it is still profitable to stake eth. This is because users can earn additional eth on top of their staked eth, which they can now withdraw whenever they need. Furthermore, even with a 3.5% APY, it is still higher than the base interest for most banks in the world.
However, there is also the fact that the price of eth could drop while a user has their eth staked, which should be something to think about before staking. This drop could mean that eth may be worth less than when it entered. An example of this is those who staked their coins in 2021 when the eth price was above $4,000. By pulling out and selling now, they would be selling at a loss, even taking into account the annual APY.
<img decoding="async" class="aligncenter size-medium" src="https://www.tradingview.com/x/P6dVnavZ/" alt="Tradingview.com ethereum Price Chart (eth Bet)” width=”2804″ height=”1746″/>
eth price fails to hold $1,600 | Source: ETHUSD on Tradingview.com
Featured image from iStock, chart from Tradingview.com
