Our experts talked about trends in the staking cryptocurrency niche after the Shapella update and its impact on cryptoasset prices
The price of Ethereum cryptocurrency (ETH) crossed the $2,000 mark for the first time since August 2022. After a major blockchain update of the second largest cryptocurrency took place. And fears of a massive outflow of funds from the network were not confirmed. Since the beginning of the year, the coin has grown by more than 60%.
The fears of many market participants were not justified
The April 13 update to the Ethereum blockchain, working title Shanghai. Which was made as part of the Shapella update group gave investors the opportunity to withdraw coins on a first-come, first-served basis. Which they placed as collateral in a special Beacon Chain smart contract, launched back in 2020. This gives them the status of a transaction validator on the network and allows them to be rewarded by issuing new coins, a process called staking.
Accumulated rewards also became available for withdrawal to the wallets. According to the analytical service Nansen, in the first 12 hours after the activation of the update, investors withdrew only 0.3% of the 18 million ETH. Which were placed in the contract for staking.
Contrary to the fears of many market participants, the rate of ETH tested $2,000. It’s safe to say that traders and investors took the update positively. The possibility of withdrawal of coins [from staking] is limited. As it can put pressure on the price.
Only 43.2 thousand ETH can be unlocked in a day. About 170 ths ETH will be sold at market price in the near future. But even if coins will be withdrawn at the maximum allowed limit per day. That figure would fit into the average ETH inflow to the exchanges and would not critically affect the price of the coin. It’s important to understand that many validators are just now starting to test the new feature. And they are withdrawing exactly the earned funds and not the deposit of 32 ETH. Accordingly, they plan to validate transactions further, our experts explain.
What will happen to the price of ETH in the next week
According to Coin Metrics analyst company, about 1.2 million ETH are expected to be withdrawn from staking in the next five days. Which is equivalent to about $2.3 billion at current prices. About $36.7 billion in Ethereum coins remain in the Beacon Chain.
The price of ETH could experience fluctuations in the coming weeks. As some investors will rush to withdraw coins and sell them. But those who were not ready to freeze their assets before. Then now on the contrary, may decide to place coins in a smart contract. Most likely, the upgrade of the network in the medium to long term will lead to the growth of ETH exchange rate. But before that, a period of increased volatility is possible, our experts say.
Staking as a service
Self-staking Ethereum involves setting up equipment. And mandatory minimum deposit of 32 ETH. But even more private investors use stacking services on cryptocurrency exchanges. And decentralized platforms that provide the service of so-called liquid staking.
In this case, exchanges or services act as a validator. Which pools users’ funds into a single pool with a user-friendly interface. And also with the reward for staking in proportion to their investment. The largest staking platform Lido. At the same time, being a validator, manages about 31% of all ETH in staking. Binance, Coinbase and Kraken crypto exchanges are also in the top five largest validators.
Staking from crypto exchanges
The main advantage of staking services from exchanges is simplicity. The user does not need to understand the intricacies. The user only has to press a couple of buttons and be assured that staking works. Interest payments are made by the exchanger. And it also takes the rights and responsibilities. If there are any difficulties, you can write to the support service and get an answer in a short time. This is always suitable for beginners. That is why the popularity of staking through exchanges or platforms will not suffer much from Ethereum updates.
The possibility of unlocking coins is unlikely to have much effect on the popularity of staking services. Their target audience is not so much those investors who were not ready to freeze their assets. But those who simply don’t have 32 ETH to place in a smart contract. The demand for the service, even if it falls, is insignificant, our experts say.
Kraken leads in the number of applications to withdraw coins from staking. The U.S. exchange accounts for more than 86% of the total amount of ETH. Which are now “in line” for withdrawal. The exchange was forced to stop its staking service in the U.S. and pay a $30 million fine when the Securities and Exchange Commission (SEC) recognized its staking service as the equivalent of illegal sales of securities. Because of such bans in the U.S., it is the decentralized platforms where coins will be put. The use of which the SEC will not be able to prohibit technically.
Staking on decentralized platforms
Decentralized liquid staking services allow you to invest in staking coins from Ethereum and other blockchains. Which work on the Proof-of-Stake (PoS) algorithm. And receive derivative tokens of equal value in return. Which are also traded on cryptocurrency exchanges. And can be used for additional earning strategies. Examples of such platforms include Lido, Rocket Pool, Stakewise, and others. Many of them issue their own tokens. Which give you the right to vote in DAOs or get discounts on fees for services.
Our Crypto Upvotes experts point out that the investment appeal of such platforms’ tokens depends not only on the set of their services. But also their overall marketing performance, turnover and trends in the market. Some platforms don’t have a token. But this does not prevent them from attracting users. For example, stake.fish is popular due to the experience and reputation of the f2pool behind it. It is a well-known brand in the niche of mining pools.
Tokens of the largest staking platforms also benefited from the successful Ethereum update. The tokens of Lido (LDO), Rocket Pool (RPL) and Stakewise (SWISE) showed growth of 6-7%.