Ethereum Staking Surpasses 30 % of Supply as ETH Price Tumbles Below $2,000
February 17 2024 – The amount of ether locked in proof‑of‑stake contracts has risen to an all‑time high, now accounting for just over 30 % of the network’s circulating supply. The surge comes as the market price of ETH, which spiked to nearly $5,000 in August 2023, struggles to maintain the $2,000 level.
Staking Milestone
- Supply locked: Approximately 36.9 million ETH – roughly 30.4 % of the total circulating supply – are currently staked, according to data from Validator Queue.
- Validator count: The figure is distributed across about 967,000 active validators.
- Historical context: This is the first time the staking share has broken the 30 % threshold, surpassing the previous record set at the end of January.
Price Divergence
- Price trajectory: After reaching an all‑time high of almost $5,000 in late August 2023, ETH has lost more than half of that value and is now hovering around $2,000, based on CoinGecko price charts.
- Market sentiment: The decoupling of staking participation from price performance suggests that many participants view ether as a long‑term store of value or network security asset rather than a short‑term speculative instrument.
Queues and Liquidity
- Entry backlog: With 3.92 million ETH awaiting placement in the validator set, the entry queue has lengthened to roughly 68 days.
- Exit queue: The exit queue is currently empty, though withdrawals still endure an eight‑day sweeping period before funds reach the recipient address.
- Liquidity impact: The expanding entry queue reflects heightened demand for staking, while a clear exit path may encourage more participants to lock up ETH despite price weakness.
Rewards and Concentration
- APR: The network‑wide annual percentage rate for staking sits at about 2.84 % (source: Validator Queue).
- Dominant providers: Lido controls roughly 24 % of all staked ETH – around 8.7 million tokens – according to Dune Analytics. Centralized exchanges and other custodial staking services also hold sizable portions of the staking pool.
Liquid‑Staking TVL
- Peak levels: During the summer rally, total value locked (TVL) in liquid‑staking protocols topped $85 billion.
- Recent decline: Following the market correction triggered by the October 10, 2023 crash, liquid‑staking TVL has fallen to just under $40 billion.
Analysis
-
Staking as a hedge against price volatility
The continued inflow of ether into staking contracts, even as the spot price retreats, points to a growing perception of staking rewards as a hedge. Even a modest 2.8 % APR can soften the impact of price declines for long‑term holders. -
Network security benefits
With more than a third of supply now securing the chain, the Ethereum network’s resistance to attacks improves. A higher proportion of staked ETH reduces the incentive for malicious actors to attempt a 51 % attack, since they would need to control a substantially larger share of total supply. -
Potential bottlenecks
The near‑70‑day entry wait time could deter new participants, especially retail investors who lack patience for long onboarding periods. If the queue continues to grow, protocol developers may need to streamline validator onboarding or expand the number of slots. -
Centralization concerns
Lido’s 24 % share of total staked ETH raises questions about centralization of voting power and reward distribution. While pooled staking offers convenience, it concentrates influence in a few large entities, which could affect governance outcomes. - Liquidity strain in liquid‑staking protocols
The drop in liquid‑staking TVL suggests that participants are pulling assets back into more traditional holdings or that reduced market optimism is limiting inflows. Persistent low TVL could impact the yield curves of these protocols and their ability to provide competitive rates.
Key Takeaways
| Metric | Current Figure | Trend |
|---|---|---|
| Staked ETH | 36.9 M (≈30.4 % of supply) | New all‑time high |
| Active validators | ≈967,000 | Gradual increase |
| Entry queue | 3.92 M ETH, ~68 days | Growing pressure |
| Exit queue | Empty (8‑day sweep delay) | Faster exits |
| Network APR | ~2.84 % | Stable |
| Lido share | ~24 % of staked ETH | Dominant player |
| Liquid‑staking TVL | <$40 B (down from $85 B) | Declining |
Even as ETH’s price remains well below its summer peak, staking participation is reaching unprecedented levels, reinforcing network security but also exposing new operational and centralization challenges.
The market will be watching whether the entry queue length stabilizes and if liquid‑staking protocols can revive their TVL as price dynamics evolve.
Source: https://thedefiant.io/news/blockchains/ethereum-staking-breaks-new-highs-as-price-slumps
