On February 7, the amount of Ethereum (ETH) in staking exceeded 25% of the total supply, which is 120.1 million coins. This comes against the backdrop of the entire crypto market growth and increased interest in Ethereum. In particular, the latter is connected to the upcoming Dencun update. As of today, the price of ETH is more than $2,650. Over the previous week, the price rose by 9.5% β from $2,289 to $2,507.
How and why are investors putting ETH into staking
As a reminder, Ethereum runs on Proof-of-Stake (PoS) consensus. Thus, to become a validator and get rewarded for validating and adding transactions to the blockchain, users need ETH. At the moment, the requirements for validators are as follows: suitable hardware and 32 ETH. The annual percentage rate (APR) is about 3.6% in ETH.
32 ETH is quite a large sum; at today's price, it is about $80,000. Moreover, not everyone has the necessary hardware.
However, there are solutions that allow users to move a smaller amount of ETH into staking. Here, the solution provider combines the funds into one pool of 32 ETH and runs a validator while sharing the rewards with those who delegated their coins.
These solution providers come in centralised and decentralised forms. For example, the former include staking services on exchanges like Coinbase or Binance, and the latter include projects like Lido and Rocket Pool. It is the same with CEX and DEX; the difference is control over the funds. They can also differ in conditions, such as the time of blocking funds or the size of the APR.
In general, for ETH holders who believe in growth, this is a great opportunity to increase the number of coins.
A quarter of the ETH supply is in staking
On February 7, the amount of ETH in staking exceeded 30 million out of a total supply, which is 120.1 million. For comparison, in July 2023, only 20% of ETH were locked in staking.
More details on the key ETH staking metrics can be found on this Dune dashboard.
Notably, a third of ETH was staked through Lido. Investors trust this protocol more than similar projects and centralised exchanges.
It is also worth noting that the number of Ethereum network validators is approaching 1 million. The higher number of validators means that the blockchain is safer, less susceptible to censorship, and more stable.
ETH price growth drivers: upcoming Dencun upgrade and approval of spot ETFs
Ethereum is currently trading at around $2,650. Over the previous week, along with BTC, the price rose by 9.5% from $2,289 to $2,507.
The main short-term driver of Ethereum's price growth is the Dencun upgrade. Speaking of the long-term factor, it is, of course, the approval of spot Ethereum ETFs.
Dencun upgrade
On February 8, one of Ethereum's core developers, Tim Beiko, announced that the Dencun upgrade will go live at slot 8626176 corresponding to March 13 this year. Overall, it aims to optimise data storage on the blockchain.
One of the most anticipated updates is EIP-4844 (Ethereum Improvement Proposal). It will add a proto-danksharding feature to the blockchain, which will allow storing part of the transaction data off-chain. With this, the cost of fees on Ethereum and L2-solutions (Arbitrum, Optimism, and so on) will decrease significantly.
Waiting for spot Ethereum ETFs
After the US Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs on January 11, the likelihood of similar financial instruments with ETH being approved soon has increased significantly. Yes, the SEC has recently delayed decisions on applications from various companies, but a similar thing happened with spot Bitcoin ETFs a few months back in 2023.
Bloomberg ETF analyst Eric Balchunas believes that such ETFs will be approved by May of this year.
To sum up, investors have positive expectations about Ethereum. However, market sentiment can change dramatically. So, do not overestimate the risks and be careful with your funds. If you want to transfer money to staking, study in detail the principles of work and conditions of the chosen platform first.
π You might also like:
What's BTC possible price in 2024: predictions and opinions
What is a spot bitcoin ETF, and why does everyone talk about it
