Stakers unlock $2,3 billion worth of Ethereum after asset rises 160%

What’s new? The queue of validators waiting to exit the Ethereum network has broken the record for waiting time, as many of them are eager to withdraw coins from lockup due to the sharp rise in the asset’s price. Validators intend to withdraw about 625 000 ETH worth $2,3 billion, but high demand for staking from institutional investors may reduce selling pressure.

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What else is known? The overload is due to Ethereum’s Proof-of-Stake (PoS) consensus algorithm, which limits the speed at which validators can join and leave the network. Validators are organizations that stake coins to protect the blockchain in exchange for rewards.

To withdraw coins from staking, validators currently have to wait more than 10 days, which indicates a massive desire to lock in profits. It is likely that those who blocked coins in staking when their price was significantly lower are the first to want to withdraw them.

Thus, in March and early April, there was a surge in the number of validators joining the network when the ETH price was $1500-2000. However, since its low in early April, ETH has increased by 160% to date.

“When prices go up, people unstake and sell to lock in profits. We’ve seen this pattern for retail and institutional levels through many cycles,” said Andy Cronk, co-founder of staking service provider Figment.

A sharp increase in the volume of coins that validators seek to withdraw from staking can also occur when large institutions change custodians or wallet technology, he added.

The sharp increase in withdrawals from staking was also facilitated by Justin Sun, founder of the TRON blockchain and head of the HTX and Poloniex crypto exchanges. Data from Arkham Intelligence shows that on July 18, his address requested the withdrawal of 60 000 ETH from the Lido liquid staking platform. As of July 23, according to Dune data, 237 000 ETH are in the queue for withdrawal from staking on Lido.

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Despite the massive withdrawal of ETH from staking, there may not be strong selling pressure, as there is steady demand for token staking and the activation of new validators.

Thus, more than 343 000 ETH worth nearly $1,3 billion are waiting to be staked, causing the entry queue to stretch to more than six days — the longest period since April 2024.

Some of this new demand may have been driven by public companies accumulating ETH to provide indirect access to the asset to their investors through shares, such as SharpLink Gaming (SBET) and Bitmine (BMNR). For example, Sharplink Gaming has accumulated more than $1,3 billion in ETH since the end of May and has been actively directing coins into staking.

In addition, some of these companies attracted assets in kind as part of their fundraising efforts, which may have prompted institutional token holders to abandon staking and start investing, noted Matthew Sheffield, head of spot trading at broker FalconX.

On May 29, the US Securities and Exchange Commission (SEC) clarified that staking does not violate securities laws, which has increased interest among institutional investors.

As a result, the number of active validators has grown to 54 000 since the end of May, reaching a record high of nearly 1,1 million, according to validatorqueue data.