3 - 5 minute read
Over the last few weeks, Ethereum staking deposits have slightly declined due to higher regulatory pressure and the upcoming Shapella upgrade, also known as the Shanghai hard fork, slated for April 12th. Glassnode, a reliable on-chain analytics provider, reported on the current status of Ethereum staking activities on April 9th. The data revealed that the current lull is due to regulatory pressure and the Shapella upgrade.
The United States financial regulators have been cracking down on crypto assets, with the Securities and Exchange Commission (SEC) insisting that ETH is a security. Despite no official legislation classifying ETH as a security, the SEC has clamped down on staking activities. These regulatory measures have caused a decline in Ethereum staking deposits.
Deposit trends by staking providers have exhibited a clear shift over time with Kraken, Binance and Coinbase jousting for deposit allocations across the Beacon Chain's early days.— glassnode (@glassnode) April 9, 2023
As the dust settled between the three giants, it was Lido who emerged victorious, continuing to… pic.twitter.com/yp50NWQ5XJ
The Shapella hard fork, on the other hand, is a highly anticipated upgrade of the Ethereum network that will enable the phased release of ETH staked on the Beacon Chain. As Glassnode noted in their report, these two factors have been responsible for the slight decline in Ethereum staking deposits.
Interestingly, Glassnode also observed that major centralized exchanges such as Coinbase, Binance, and Kraken are losing market share to the liquid staking platform Lido. The report stated that Lido has emerged as the victor, continuing to dominate deposit inflows. Lido accounts for almost a third of the total amount of ETH staked, which is around $11 billion from the 5.9 million ETH on the platform.
Centralized exchanges like Coinbase take a 25% commission from staking rewards, whereas Lido has a 10% commission and offers the possibility of earning additional yields on DeFi platforms via its staking token Lido Staked ETH (stETH). As a result, highly aware users have gravitated towards more profitable platforms.
According to Ultrasound. Money, which tracks Ethereum metrics, 18.1 million ETH is currently staked, totaling around $33.7 billion or approximately 15% of the entire supply. This amount will be slowly released for withdrawal in the weeks and months that follow after the Shapella upgrade. Analysts believe that liquid staking platforms such as Lido will benefit significantly when ETH is released from the Beacon Chain.
For traders, it is advisable to closely monitor regulatory conditions as heightened regulatory pressures will cause Ethereum staking deposits to decline. Savvy traders have shifted to liquid staking platforms such as Lido as these platforms offer higher returns on investment due to lower commission percentages. The Shapella upcoming upgrade should also be monitored as it will allow phased releases of staked ETH.