Weekly Inflows into Ethereum Staking Exceed $1 Billion – What Will Happen to the Ether (ETH) Price?

Ethereum logo. Source: Adobe

According to a Dune analytics dashboard, investors moved over 570,000 Ether (ETH) tokens into the blockchain’s staking smart contract in a record week for Ethereum staking last week.

That is more than $1 billion in Ether tokens, and it was the fastest weekly rate of ETH deposits into the staking contract ever.

Last week, investors requested the withdrawal of approximately 380,000 ETH tokens, valued at close to $700 million at current market prices, according to the dashboard.

This represents a significant decrease from the previous week’s withdrawal requests.

Withdrawal requests reached a staggering 1 million ETH tokens in the first five days after staked Ether token withdrawals were enabled by the successful implementation of the so-called “Shapella” upgrade to the Ethereum blockchain on April 12.

Indeed, since staked ETH withdrawal requests were enabled just under two weeks ago, withdrawal requests have outnumbered new deposits by more than 550,000 ETH, which is worth nearly $1 billion at the current market price.

However, the total number of staked ETH tokens has increased since the Shapella upgrade due to a 50,400 per day limit on actual Ether token withdrawals (other ETH withdrawal requests enter a queue) and a surge in deposits (which enter into the staking contract instantly).

According to Glassnode, an on-chain analytics firm, the total number of ETH tokens staked was last at 19.227 million, up over 1.1 million since April 11th.

Assuming that investors continue to deposit ETH into the staking contract at a faster rate than the withdrawal limit of 50,400 ETH, which has largely been the case over the last two weeks, this number should rise further.

Indeed, analysts predict that increased flexibility in the ETH staking process will entice large sums of ETH into the staking contract in the coming months and years.

Rival proof-of-stake layer-1 protocols, such as Cardano, have staking participation rates of 60-70%.

With a total ETH supply of 120.4 million, the current staked Ether participation rate is only around 15.9%.

Given the lack of total flexibility in ETH staking, the daily staked ETH withdrawal limit may deter some ETH investors.

However, this participation rate is expected to rise significantly and may eventually reach 40-50%.

That means there could soon be 50-60 ETH tokens in the staking contract, resulting in a significant reduction in the readily available supply of unstaked ETH.

This, combined with Ether’s deflationary tokenomics (due to a transaction fee burn mechanism), suggests that the Ether price will benefit from significant deflationary tailwinds in the coming years.

Where Next for the ETH Price?

The post-Shapella upgrade optimism that sent ETH/USD to new 11-month highs in the mid-$2,100s was short-lived, with ETH since pulling back to trade closer to its early April levels in the $1,800-$1,900s.

Indeed, Ether broke a key short-term uptrend in the middle of last week, prompting calls for a retest of key downside support levels, such as the $1,700 resistance-turned-support zone.

However, ETH’s strong rebound from its 50-Day Moving Average on Tuesday could be an early indication that the most recent short-term market correction has ended.

In mid-February, ETH/USD experienced a similar short-term correction to the 50DMA before recovering to new highs.

Short-term bulls may be targeting a retest of annual highs, but major upcoming macro risk events such as this week’s US GDP and inflation reports, followed by next week’s Fed meeting, jobs, and ISM survey data, could throw a wrench in the works if they deliver a meaningful shift in the macro narrative.