Ethereum Staking Dries Up as Steth Loses Balance – Trustnodes

Desire to stake eth has gone down to its lowest level since staking began with the queue to become a validator dwindling.

Just 700 individuals/entities are waiting to become a validator currently, down from 1,300 on Sunday and significantly down from the usual 13,000 a day.

In total there are now close to 400,000 validators which have deposited 12.7 million eth, worth $24.3 billion.

So it may be the market has reached saturation levels with desire to stake previously expected to fall at around these levels.

That’s in great part because the staking APR is now down to 4.3%, and will fall further if staking amounts continue to rise.

Yet staked eth tokens, or steth, seem to be playing a role too in this new dynamic between price and staking.

Lido, a smart contract based platform that tokenized staked eth since launching in January 2021 as Trustnodes reported at the time, has grown to dominate staking with it accounting for more than 32%, or about 4 million deposited eth.

A lot of these steths are used to defi, deposited as collateral or on Curve or to yield farm on Uniswap with it generally all great when prices move up, but margin considerations kick in when it moves down.

So much so that it crashed, at least on one exchange, Gate.io, while Luna collapsed earlier this month.

What happened here exactly is not too clear. We’ve zoomed in to one minute candles, and still it shows this huge plunge to 0.34 eth when a steth is basically an eth.

Since it’s all in one minute, we presume it was a glitch of sorts, although pressure on price had increased prior to this flash crash.

Once it’s over, that pressure remains, with it recovering to 0.88 eth where it stayed for a bit. It is now back to the more usual 0.97, but during this recovery period there may have been less desire to stake eth because you could just buy the discounted steth that amounts to pretty much the same thing.

Except if you stake the eth yourself, you get the steth for ‘free,’ and so you basically kind of haven’t staked eth practically speaking unless you leverage too much and lose both your eth and steth.

Making it very interesting, and more an indication that perhaps the market is changing its medium outlook on eth as this steth situation seems to have been cleared.

In that process, a significant amount of steth based over-leverage in defi has been cleared as well, with all that steth flooding the market and so causing the bigger than usual discount.

But now that this situation seems to have resolved with steth back to its usual $50 discount, you’d expect the staking to recover, although perhaps not if the market thinks the price won’t be great in about a year when the staking eth are to be unlocked.

That might be the depth of the bear, although the merge might keep it at bay, making calculations very complex and so we get a pause of sorts in staking.