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Interest in staking declined due to Ethereum's weakness

17 Oct, 2023
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We recently covered the growing load on the Ethereum network due to the massive inflow of validators. The project's developers estimate that the number of validators will double by mid-2024 to reach 2 million.

Image source: beaconcha.in

However, the market is making adjustments. In 2023, Ethereum lost 20% against Bitcoin.

Image source: StormGain cryptocurrency exchange

Investors' last hopes were on the launch of Ethereum futures ETFs in October, but that has been mediocre. On the first day of trading, altcoin ETFs attracted just 1.3% of the amount raised by a similar Bitcoin-based fund in 2021 ($7.4 million vs $571 million, respectively). Trade volume was even lower, coming in at 0.19%.

Image source: k33.com

The yield from staking now stands at 3.5% APY, which doesn't even come close to bridging the difference between Ethereum and Bitcoin.

Image source: beaconcha.in

This, coupled with the poor reaction to the ETFs' launch, has led to disappointment among altcoin investors. The queue for participation in staking has declined to nearly zero, whereas there were over 50,000 willing participants back in September.

Image source: validatorqueue.com

The main factor restraining the altcoin's growth is the position of the SEC, which is seeking to label the crypto as a security. Coinbase received a pre-enforcement action notification in March but refused to quit the staking programme voluntarily. If the court sides with the SEC, Ethereum will receive another painful blow. The US crypto exchange ranks second In Ethereum staking with 2.3 million staked coins and a share of 8.4%.

With Coinbase leaving the market, Ethereum's other problem, centralisation, will become exacerbated. Some clients are likely to join the Lido Finance pool, which has a 32% share.

Image source: nansen.ai

Vitalik Buterin has admitted that the increase in centralisation is one of the network's major problems and that the solutions being considered are far from ideal. He estimates that it will take 10-20 years to resolve the situation.


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