Liquid ETH Staking Surging – Here’s What That Means for the Ether Price

The activation of staked ETH withdrawals in wake of the Ethereum blockchain’s Shanghai upgrade back in April has resulted in a surge of inflows of ETH tokens into the staking contract.

As per data presented by a Dune dashboard, the total number of ETH tokens now engaged in the staking contract now number around 23.66 million, up over 4.3 million since Shanghai was implemented, reflecting ETH investors’ greater confidence in staking now withdrawal flexibility has been implemented.

Liquid Staking Protocols like Lido have been big winners amid the surge in interest towards ETH staking.

According to DeFi Llama, the supply of stETH tokens (which are issued when Lido users stake ETH through the protocol) was last at all-time highs above 7.5 million.

That means Lido accounts for over 30% of all staked ETH, an impressive level of dominance.

Its dominance is even greater when considering that the next most used liquid staking protocol Rocket Pool has only issued less than 750,000 rETH tokens.

A key selling point of staking ETH through a liquid staking protocol like Lido or Rocket Pool is that you get issued a yield-bearing token which can then be utilized with Decentralized Finance (DeFi) in order to further boost yield.

That probably explains why the dominance of liquid staking protocols versus their centralized, non-liquid token-issuing counterparts has been growing.

The amount of ETH staked by Lido is up 62% in the last six months, as per Dune.

Meanwhile, the amount of ETH staked by Rocket Pool is up an even more impressive 120%.

Over the same time period, Coinbase and Binance’s supply of staked ETH has only risen by 4% and 21% respectively, while Kraken’s supply has dropped by 34%, though this has a lot to do with the SEC forcing the closure of its staking program in the US.

Staking pools Figment and Kiln have done very well, growing their supply by 108% and 1400% in the last six months respectively.

Here’s What the Rise of Staking Supply Means for the Ether (ETH) Price

As per Dune, nearly 20% of the ETH supply is now staked.

Comparable proof-of-stake blockchains with flexible withdrawals like Cardano have a staking participation rate in the 60-70% region.

The percentage of staked ETH is thus expected to rise substantially in the coming years.

This should reduce the supply of ETH tokens that are readily available for sale, which could potentially act as a deflationary force that pushes the ETH price up in the long run.

At the very least, a higher staking participation rate should contribute to a stronger and more secure ETH blockchain, which should bolster investor confidence in the ecosystem.

Meanwhile, if liquid staking protocols continue to dominate the staking landscape, as has been the case up until now, this will be great for Ethereum’s DeFi ecosystem.

Rather than ETH tokens being locked away in the staking contract and doing nothing (as happens if you stake with Coinbase or Binance), liquid staking protocols hand a yield-bearing staked ETH token back to the stakers.

This token can be used to substantially increase liquidity across the Ethereum DeFi ecosystem, which should bolster its adoption, thus boosting the utility and long-term demand for ETH.

While ETH may be more sensitive to themes such as broader macroeconomic conditions and US regulation in the short-run, the growth of staking should be a long-term tailwind.

ETH is in a clear uptrend since its June 2022 lows and if it can get above the key $2000-2100 resistance area this summer, the door could be open to swift gains towards resistance in the $3500 area and then onto all-time highs in 2024.