StakingMarketRegulationCryptostake ExplainsUncharted
Ethereum Staking Is Booming With $85 Billion or 25% of Circulating Supply Locked in the Network

$85 billion locked in the Ethereum blockchain signify the rising popularity of ETH staking   

Ethereum staking has become a highly favored investment avenue in the cryptocurrency industry. Following the Merger, which marked Ethereum's transition to the Proof of Stake (PoS) consensus mechanism, funds have flowed into the network in an ever-strengthening stream. Currently, the total value locked in the core Ethereum network stands at 30.2 million tokens staked, amounting to $85 billion. With 1,157,708 Ethereum validators actively participating, they collectively hold 25% of the total circulating supply of the second-largest cryptocurrency.


Ethereum Staking TVL. Source: Glassnode

February has brought bullish momentum to the Ethereum network, with significant activity seen in both staking and price movements. During the first half of the month, investors added 600,000 ETH to Ethereum 2.0 staking contracts, indicating sustained confidence in the platform's long-term prospects. Additionally, ETH surged to new yearly highs, surpassing $2,800 in value. As of now, Ethereum is trading slightly above $2,800 after gaining 16% in a week, maintaining its positive trajectory and reinforcing optimism among market participants.

The surge in committed ETH not only fortifies network security and efficiency but also locks up a significant portion for staking, creating scarcity. This scarcity can drive up demand for ETH, leading to potential price appreciation. It's the basic law of economics that when demand is high, the price of the associated asset, product, or service tends to increase. Additionally, ETH is currently in a deflationary state, with its total supply reduced by 0.21% since the Merge. This reduction further contributes to the bullish dynamic of Ethereum's price.

The centralization threat remains an issue regardless of capital inflow 

Despite Ethereum staking's impressive Total Value Locked (TVL) exceeding $85 billion, concerns arise over its concentration in the hands of select liquid staking firms. This consolidation threatens Ethereum's decentralization, as these entities amass control over a significant portion of the circulating supply. While liquid staking platforms offer convenience for stakers by eliminating technical barriers, they introduce risks. Delegating ETH to these platforms transfers control to them, granting disproportionate influence over the network. 

The largest platform currently controls nearly a third of all staked ETH, posing threats of a single point of failure and potential censorship. Security breaches or operational issues could compromise a significant portion of staked ETH, jeopardizing network security. Moreover, collusion or external pressure on these platforms could lead to transaction censorship or validator blocking, undermining the network's neutrality and resistance to censorship.

Price action decoded: Why Ethereum is up today? 


ETH/USDT 1-Week Chart. Source: Tradingview.

Over the past two weeks, Ethereum's price has decisively broken out of its descending channel, solidifying the bullish sentiment. Notably, the 50-period Exponential Moving Average (EMA) has crossed above the 200-period EMA, forming the coveted Golden Cross pattern. While not always reliable in crypto markets, this occurrence appears to accurately reflect current market conditions. With momentum on its side, ETH is poised to challenge the $3,000 mark, a significant psychological barrier. How Ethereum interacts with this level may provide insight into its future behavior in the weeks ahead.

The SEC's approval of Bitcoin ETFs has sparked hopes for Ethereum ETFs. Several proposals are pending SEC approval by May 23rd, including Grayscale and BlackRock's applications. 21Shares and Ark Invest have recently updated their applications, showing their commitment. Franklin Templeton, a major player, also filed a new application on February 12th. An Ethereum ETF approval could attract significant institutional investment, boosting the Ethereum ecosystem.

On March 13, the Ethereum blockchain will roll out the highly anticipated Dencun upgrade, set to boost the performance, efficiency, and security of the Ethereum mainnet. This upgrade will introduce "proto-danksharding," aimed at cutting transaction costs on Ethereum's layer 2 scaling networks (rollups) by creating dedicated storage spaces or "blobs" for data. These upgrades are also expected to lower data availability costs on the Ethereum mainnet, making projects like Celestia, EigenDA, and Avail more appealing to users. Overall, this marks a significant milestone for Ethereum, as staked Ether represents tokens temporarily taken out of circulation, easing potential selling pressure on ETH.