The quantity of ETH tokens that are locked in the staking smart contract has continued to climb higher in the aftermath of the significant Ethereum blockchain upgrade that took place last week. This upgrade made it possible for the first time since December 2020 for ETH tokens to be unstacked from the Beacon chain. Staking was enabled at that time.
According to data provided by crypto analytics company Glassnode on Monday, the total number of ETH tokens that had been staked stood at 18.62 million.
This is the quickest speed at which the total number of staked ETH tokens has increased since late February, with an increase of approximately 500,000 in only one week.
In addition to this, it establishes a new all-time high for the total quantity of ETH tokens that have been staked.
Some traders and experts were taken aback by the meteoric surge in the quantity of ETH tokens that have been staked in the past week. These individuals had anticipated that the enabling of staking withdrawals would result in a net outflow of funds from the staking smart contract.
Some of these traders and analysts had anticipated that ETH investors would make a widespread withdrawal of their ETH tokens and accrued ETH yield, which might have resulted in a wave of selling and a decrease in the price of ETH.
Since the contrary occurred (that is, the quantity of ETH tokens staked increased rather than decreased), it should not come as a surprise that bearish bets were unwound, which resulted in an increase in the price of ETH.
The ETH/USD exchange rate surged from below $2,000 and has been consolidating in the $2,100 range for the past few days.
It would appear that there were a greater number of ETH owners who waited on the sidelines for the successful implementation of staking withdrawals before depositing their ETH into the staking contract than there were staked ETH owners who were anxious to withdraw their tokens from the staking contract and sell them down. This is because the successful implementation of staking withdrawals was contingent on the successful implementation of staking withdrawals.
Investors have less risk when they place their tokens into a staking contract thanks to the increased flexibility of ETH staking, which was introduced recently.
As a consequence of this, significant influxes of Ether (ETH) into the staking contract are anticipated for the years to come.
Following the reaction of the market the previous week, one would anticipate that the total number of ETH tokens staked will continue to increase, which will operate as a continuing tailwind for the price of ETH.
Assuming that investors are making a long-term investment play when they deposit their ETH into the staking contract, this should function as a deflationary tailwind for ETH.
This is due to the fact that the supply of freely available non-staked ETH will decrease as the number of staked ETH increases, leading to an increase in its scarcity and possibly leading to an increase in its price.
And there is still a significant amount of unstacked ETH that could be released into circulation.
Only roughly 18.6 million ETH tokens out of the total current circulating quantity of just under 120 million tokens are currently in the staking contract, as was mentioned above. This is a rather small percentage of the entire supply.
That works out to about 15.5%.
Proof-of-stake layer 1 is comparable to other systems. Staking participation rates for blockchain protocols like Cardano range between 60 and 70 percent of total coins.
If Ethereum were to achieve a staking participation rate of between 60 and 70%, this would mean that the amount of ETH tokens that have not been staked would drop by somewhere between 50 and 60 million.
This would have a significant influence on the market and could substantially restrict the availability of ETH tokens on major cryptocurrency exchanges as well as for other uses, such as the payment of gas fees and for use within decentralized financial systems.
In the years to come, this may prove to be a significant tailwind for the price of ETH.
The combination of the impact of the ETH token burn that will be introduced by the London hardfork in August 2021 and the decline in the ETH issuance rate that will occur as a result of the “Merge” to proof-of-stake from proof-of-work in September of last year will be another huge long-term tailwind for the cryptocurrency.
In point of fact, the total amount of Ethereum available is now decreasing at a pace of about 1.5% every year.
However, this deflation rate could accelerate in the months ahead if network congestion increases, which pushes up network fees and the ETH burn rate. This is owing to the fact that the ETH issuance rate has remained virtually stable in recent months, falling somewhere in the range of 0.5-0.6% each year.
In point of fact, the deflation rate briefly reached 5.6% earlier this year in the midst of an unexpected increase in network activity that resulted in a transient increase in network fees.
© 2015-2023 Coinposters. All rights reserved!