ETH Staked Set to Outpace ETH on Exchanges for the First Time

In a significant milestone for the Ethereum blockchain, the total amount of ETH staked is on the verge of surpassing the quantity of ether held on crypto exchanges. Recent data from Nansen reveals that the raw number of ETH staked has reached 22.8 million ($39.75 billion), while approximately 24.3 million ETH ($42.38 billion) remains on exchanges. This marks the first time that staked ETH is set to overtake the ether held on exchanges, signaling a growing trend towards decentralized technology.

The figures show that the ETH held on exchanges and the ETH staked account for roughly 20% of Ethereum’s circulating supply each. The gap between the two has narrowed significantly, with only a 6.12% difference, compared to almost 16% at the end of May and over 41% at the beginning of this year. This trend signifies a clear shift in sentiment among Ethereum users, as they increasingly choose to stake their ether on the blockchain instead of leaving it on centralized exchanges.

Source: Nansen

The reduction in ETH held on exchanges and the corresponding increase in ETH staked can be attributed, at least in part, to the regulatory challenges faced by crypto exchanges, particularly in the United States. The ongoing scrutiny from the U.S. Securities and Exchange Commission (SEC) has prompted Ethereum users to explore staking options as a means to participate in consensus and earn yields. By locking their tokens in the network, either through running validator nodes or utilizing staking services like Lido, users can earn approximately 6% in ETH as rewards.

It is noteworthy that the current surge in ETH staked surpasses the levels witnessed during the FTX scandal in November last year, where a significant amount of ether was withdrawn from exchanges. While net outflows during the FTX incident averaged nearly 130,500 ETH ($227.1 million) per day, recent net outflows from exchanges reached over 200,000 ETH ($348.3 million) on the day the SEC sued Binance, and Coinbase received its own lawsuit the following day. However, it remains unclear whether the exact ETH withdrawn from exchanges has been staked on the Ethereum blockchain.

The heightened interest in ETH staking reflects a broader shift in sentiment towards decentralized blockchain architecture. Users are increasingly opting for decentralized platforms that are less susceptible to regulatory pressure and provide enhanced security. The surge in staking inflows throughout May, following the activation of withdrawals after the Shapella upgrade, demonstrates users’ confidence in decentralized technology. Furthermore, the decision by exchanges like Kraken to unwind their staking-as-a-service programs in response to SEC threats has further bolstered the attractiveness of staking directly on the Ethereum network.

The increasing number of ETH stakers and the impending flippening of exchange balances by staked ETH demonstrate that crypto users place a high value on the benefits offered by decentralized technology. This shift toward self-custody, where users control their own keys and participate in consensus, reaffirms the mantra of “Not your keys, not your coins.” In less than two weeks, the spread between ETH held on exchanges and ETH staked has dramatically narrowed from over 16% to a mere 6%, suggesting that the staking-exchange flippening could occur by the end of this month.

As the Ethereum blockchain continues to grow and evolve, the increasing participation in staking reflects a growing desire for decentralization and a belief in the long-term potential of Ethereum’s infrastructure. The trend underscores the resilience of the Ethereum community and its commitment to building a decentralized future, where individuals have greater control over their financial assets and the benefits of blockchain technology extend far beyond centralized platforms.

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