Ethereum has captivated institutional and retail investors alike post its successful Shapella upgrade. The upgrade enabled staked ETH to be withdrawn at will – a key factor for mass adoption. The network is having good inflows of staked assets indicating growing confidence in its future. 
We map key trends around this.

1) Shapella is a success

Ethereum underwent a network upgrade on April 12 this year that enabled the withdrawal of staked ETH tokens. Although many suggested (including us) that this might cause a sell-off, the impact on price was mild. We did witness some exit activity immediately post the upgrade but it cooled down after a couple of weeks.

(Source: Glassnode)

In fact, staked ETH on the network has been growing and has reached an all-time high of 21.8 million. Lido Protocol is currently leading with 6.2 million tokens as the top depositor.

(Source: Nansen)

2) Staking ratio is still low and can grow fast

The current Ethereum staking ratio (share of eligible supply that is staked) is 15.2%. The staking ratios of some competing proof-of-stake (PoS) chains are now over 60% indicating that ETH has the potential to grow quickly. We believe that the ratio can double in the next one year. This is evident from the strong inflow of capital into liquid staking projects such as Lido or Rocket pool.

Centralized exchanges (including Giottus) have also started providing staking services with an APY in the range of 5-7% that could draw retail attention.

3) Staked ETH will get a better yield than traditional deposits

Bank deposit yields are set to drop as interest rates are lowered in the near term. That would make Ethereum staking a viable way to earn an attractive yield along with the growth of the asset itself.
As Ethereum shares all of its earnings with validators, the recent meme coin frenzy actually translated into more than 20,000 ETH gain for validators in the last week.

(Source: https://beaconcha.in/ethstore)

4) LIDO and RPL soar as a result

Top ETH liquid staking platforms Lido DAO (LDO) and Rocket Pool (RPL) have had double-digit gains in their own tokens even as the market remained sideways last week.
The market is also getting crowded – Asymmetry Finance recently raised $3 million to grow its market share.

5) US SEC crackdown concerns linger on

A crackdown by US SEC remains the main issue that ETH staking can face. It penalized Kraken $30 million for offering the service without registering in February this year and is apparently going after Coinbase as well. That Coinbase paused withdrawals of staked ETH yesterday is a concern, though they say its temporary and not related to the SEC.

What does this mean for you?

Are you a believer in Ethereum and its ecosystem? Then you must invest in the asset or build an ETH-heavy portfolio with time. You must consider staking ETH for stable rewards while you wait for the asset to grow in price over the next couple of years. 

Do consider short-term macroeconomic risks and regulatory risks. We are all so used to it now, aren’t we?

Disclaimer: Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.