CoinDesk report:
According to the latest data from Coinbase, an astonishing 32.6 million ETH (over 27% of the total supply) is currently staked to secure the Ethereum proof-of-stake network, as the cryptocurrency market eagerly awaits the launch of a physically-backed Ethereum ETF in the United States.
This milestone highlights the increasing enthusiasm for Ethereum investments, despite the ecosystem grappling with the anticipated impact of a long-awaited Ethereum ETF. Unlike underlying assets, new exchange-traded funds will be unable to hold any stake due to regulatory restrictions.
The growth of staked ETH has been steady, with a slight slowdown since the upgrade in Shanghai in spring 2023. At the time of writing, the trading price of Ethereum is just below $3,000, experiencing a 14% decline over the past week amid significant market volatility.
The approval process for an Ethereum ETF by the U.S. Securities and Exchange Commission (SEC) has been slower than initially anticipated. Bloomberg ETF analyst James Seyffart tweeted, “We think these things might be listing later next week or week of the 15th.”
Previously, Bitwise submitted a revised S-1 form ahead of the July 8 deadline, possibly indicating an imminent product launch. Following suit, VanEck submitted its own amended S-1 on Monday.
Renowned Ethereum researcher Evan Van Ness provided insights on the staking situation, telling Decrypt, “Given that Ethereum’s proof-of-stake has several orders of magnitude more economic security than proof-of-work, we absolutely do not need this much ETH at stake.”
He also cautioned against the risks of centralization, stating, “If your staking pool is majority-client or cloud-operated, then your ETH is at risk.”
The inability of exchange-traded funds to hold stakes has sparked innovative approaches by traditional financial institutions. Sources revealed that Franklin Templeton, managing $1.6 trillion in assets, is planning to launch a fund focused on altcoins and staking rewards.
Meanwhile, Toronto-based Purpose Investments has already introduced an Ethereum fund that is allowed to hold shares of underlying ETH. In a press release, they stated, “We have long been excited about Ethereum and what it represents in terms of technology and ecosystem. Initially, the corporate structure was the best option; now we believe an ETF is the most efficient.”
The series of activities surrounding Ethereum staking and ETFs has also raised questions about the future of the ecosystem. With more institutional participants entering the staking waters and the proportion of ETH at stake rising, the Ethereum community will closely monitor how these developments impact network security, decentralization, and overall health.
Danny Ryan, a researcher at the Ethereum Foundation, shared his views on staking economics at last year’s EthStaker Staking Gathering, stating, “Betting on Ethereum is influenced by the reward curve and the overall economic incentives built into the protocol. The goal is to create a sustainable and secure system that encourages participation and maintains the integrity of the network.”
The recent market slump can be attributed to factors such as the impending Mt. Gox repayment and macroeconomic concerns. After nearing $54,000 on Friday, Bitcoin once again dropped below $55,000 on Sunday, marking its lowest level since late February. This volatility underscores the complex interplay between staking trends, ETF expectations, and broader market forces.
Currently, the milestone of 24.7% staked demonstrates the increasing conviction among ETH holders that staking is the future. Whether the future includes ETFs directly or is shaped by a new generation of equity-focused funds and companies remains uncertain. As the cryptocurrency world awaits the final decision of the SEC, a potential transformative moment in Ethereum’s history is on the horizon.
Edited by Stacy Elliott.
