30 Aug 2022
Total ETH staked more than doubled over the past year
While the price of ETH has declined by 51% YoY, the amount of staked ETH has more than doubled: from 6.5M to 13.4M.
Because staking is high risk, the vast majority of ETH remains unstaked, but when withdrawals are unlocked (scheduled for 2023, after the merge), yield play might be the safest macro play. Scheduled for September 15, the merge is fast approaching and will drastically change Ethereum’s economy. Instead of miners securing the network, it will rely on validators staking ETH to the network, allowing them to run block-producing nodes and earn staking yields. At this stage, staked ETH are locked and cannot be withdrawn for an unknown period. But contrary to the "massive unlock dump" fud, the ability to withdraw is a major de-risking event that should lead to a net increase in the demand for staking. Increased liquidity for staking positions → more willingness to stake. In addition, taxing the unstaked via dilution creates another incentive to stake: Burn can go to zero while stakers market share will continue to increase. The current ETH staking yield is 4% but will decrease as a larger percentage of ETH is staked. The merge has seen many taking bullish exposure on ETH in the spot and derivatives markets and buying derivative tokens (stETH, cbETH). However, while any discount in derivative tokens will likely be arbitraged away and strike dates get crowded, staking yields should stay resilient or rise as expected after a successful merge.