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Ethereum staking outflows hit $1.3bn one week after Shapella upgrade

Staked Ether levels have dropped by $1.3 billion over the past week after the blockchain’s upgrade dubbed Shapella enabled withdrawals.

Investors withdrew 1.36 million Ether valued at around $2.6 billion and deposited only 714,290 Ether worth $1.4 billion in the week after Shapella went live — a net outflow of 647,050 coins, according to data from TokenUnlocks.

While some analysts had anticipated the upgrade would trigger a sell-off after the upgrade led to more tokens in the market, its price has remained relatively stable.

Since the commencement of withdrawals last week, the second-largest cryptocurrency has seen a moderate price increase of approximately 1.5%, currently trading around $1,970.

“ETH often has more than $10 billion of trading volume on a single day,” Patrick Scott, a crypto analyst, told DL News. “The outflows are likely less consequential than normal crypto market volatility.”

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The withdrawals from Ethereum’s staking contract are likely far from over.

In order to keep Ethereum secure, the network limits the number of withdrawals that can take place concurrently. This means those who wish to withdraw their Ether must enter a withdrawal queue.

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Based on the amount of Ether currently in line for full withdrawals, those entering the queue now will need to wait over two weeks before receiving their Ether.

Data from crypto analytics platform Nansen shows that 741,750 Ether, worth approximately $1.4 billion, is currently queued for full withdrawal. Of this amount, 68% of withdrawals are due to come from Coinbase, Binance and Kraken — the top three centralised exchanges that stake Ether on behalf of their customers.

Although stakers are in the process of withdrawing billions of Ether, the outflows may not be leaving the market altogether. Data from DefiLlama highlights significant inflows into so-called liquid staking services such as Lido, Rocket Pool, and StakeWise.

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These decentralised protocols allow users to stake Ether and receive staking tokens – like token receipts – in return, such as stETH for Lido and rETH for Rocket Pool. Staking tokens often trade close to the price of Ether, but they aren’t pegged – fixed to the price of Ether – by design.

Lido, the leading liquid staking derivative provider, has experienced a surge in the amount of Ether staked via its protocol, with a notable 2.2% increase over the past week. This uptick is equivalent to roughly 120,000 additional Ether worth about $236 million, demonstrating a significant shift in investor sentiment towards liquid staking services.

Elsewhere Rocket Pool, the third-biggest liquid staking token provider, registered an inflow of about 7%. Two smaller liquid staking protocols — and Frax Ether — have also seen gains of about 21% and 14%, respectively, in the same period.

However, cbETH, or Coinbase Wrapped Staked ETH, the only liquid staking token issued by a centralised exchange, saw its supply decrease 2.7% in the same period.

In recent months, liquid staking services have garnered significant popularity, largely due to their ability to allow stakers to employ their staking tokens – and consequently, the staked Ether by extension – across various other DeFi protocols.

Several DeFi lending protocols including Aave accept these tokens as collateral to issue cryptocurrency loans.