Ethereum’s Shanghai Upgrade Leads to Record 572k ETH Staked in a Week, Driven by Institutional Investment and Reinvested Rewards
The Ethereum network offers a constant reward of about 5 percent APR to the current 561,655 beacon chain validators.
Investors have increased their Ethereum staking activities following a decline in correction between ETH and Bitcoin after the Shapella upgrade.
Two weeks after the Shanghai Shapella upgrade clocked on the second most valuable blockchain Ethereum and more than 1.6 million ETH worth approximately $3 billion has been withdrawn. The underlying asset value has since retracted from trading above $2k after experiencing a rather strong resistance of around $2100. Trading around $1,813 on Tuesday, the Ethereum market has gained about 51 percent YTD.
Institutional investors increase Ethereum staking
With the Ethereum network stabilized under the proof-of-stake (PoS) consensus mechanism, institutional investors are comfortable staking to rake in secure profits. According to aggregate market data provided by dune analytics, Ethereum investors have deposited about 571,950 ETH into staking contracts, thereby bringing the total staked ether to approximately 18,534,825 units.
Notably, the total amount of staked ether during the Shanghai upgrade on April 12 was about 17.9 million units. Despite the daily withdrawals of about 50k Ethers, the depositors have outweighed the former in the recent past. Moreover, the Ethereum network offers a constant reward of about 5 percent APR to the current 561,655 beacon chain validators.
Investors have increased their Ethereum staking activities following a decline in correction between ETH and Bitcoin after the Shapella upgrade.
“The relevance of this falling correlation for institutional investors is that it can affect quantitative strategies that rely on cross-hedging one asset for the other (or using ETH as a hedge for less liquid altcoins),” analysts David Duong and Brian Cubellis wrote.
From a fundamental perspective it supports diversification arguments in favour of holding both BTC and ETH,
In a recent research conducted by Coinbase Global, an additional 73,000 ether could be unlocked in partial withdrawals and 822,000 unlocked in full withdrawals and that could take about 15 days to process, as of April 20.
Nevertheless, analysts believe the rate of staking ethers has outperformed the amount of ETH being withdrawn in the recent past. As a result, the overall selling pressure could significantly decline in the Ethereum market.
“It seems this is what is happening,” Noelle Achison, a market analyst and former head of research at Genesis Trading, noted.
Overall net inflow has been positive, which suggests that a significant portion of these rewards are being restaked.
ETH price action
Currently, Ethereum bulls are struggling to hold above $1800 amid an ongoing regulatory crackdown in the United States. The lack of a clear regulatory framework in the United States, which encompasses approximately 25 percent of global financial activities, has lagged behind the adoption of Ethereum in the recent past. Moreover, the SEC chair has flip-flopped on whether Ethereum is a security or a commodity.
On the other hand, the European Union recently passed the Markets in Crypto-Assets Act (MiCA) regulatory framework to ensure investors’ protection and safe blockchain and crypto development. The neutral stance has kept Ethereum price action in limbo despite increased on-chain metrics.
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Filed under: Bitcoin - @ April 25, 2023 11:06 am