in view of last week’s head Ethereum Blockchain upgrade to remove ETH token from Beacon chain for the first time since staking was enabled in December 2020 ETH Tokens locked in staking smart contracts continue to grow steadily.
Total Bets ETH The tokens stood at 18.62 million on Monday, according to data presented by crypto analytics firm Glassnode.
This is an increase of almost 500,000 in one week, the fastest rate at which the total number of bettors has increased. ETH The coin has been on the rise since late February.
It also marks a new all-time high for the total number of ETH tokens at stake.
The sharp increase in the number of ETH tokens staked over the past week spooked some traders and analysts, who had been expecting staking withdrawals to be enabled, resulting in net outflows from staking smart contracts.
Some of these traders and analysts expected ETH investors to withdraw their ETH tokens and earn massive ETH yields, potentially triggering a wave of selling and a drop in ETH price.
Given that the opposite happened (i.e. the number of dropped ETH tokens increased instead of falling), ETH unexpectedly saw a pop higher as bearish bets opened up.
ETH/USD Jumped Trading below $2,000 and consolidating towards $2,100 over the past few days.
It seems that more ETH owners were waiting for the successful implementation of staking withdrawals before depositing their ETH into the staking contract, while there were more ETH owners eager to withdraw their tokens from the staking contract and sell them.
New flexibility in ETH staking allows investors to reduce the risk of putting their tokens into staking contracts.
As a result, a substantial inflow of ETH into staking contracts is expected in the coming years.
What the Growing Participation Could Mean for Ether (ETH) Price
Given the market reaction over the past week, a continued increase in the total number of ETH tokens staked can be expected to provide a sustained tailwind to the ETH price.
Assuming that this is a long-term investment play when investors deposit their ETH into staking contracts, this should act as a deflationary tailwind for ETH.
This is because as the number of staked ETH increases, the supply of readily available non-staked ETH will decrease, increasing its scarcity and potentially increasing its price.
And the supply of unstaked ETH has a long way to fall.
Currently, as mentioned above, only about 18.6 million ETH tokens are currently in staking contracts out of a total current circulating supply of 120 million tokens.
It is around 15.5%.
Comparable proof-of-stake layer-1 blockchain protocols like Cardano have rates at stake in the 60–70% range.
If Ethereum can reach a participation rate of 60-70%, this would mean a reduction in the number of unstaked ETH tokens of around 50-60 million.
This would have a huge impact on the market and could significantly reduce the availability of the ETH token on major crypto exchanges and for paying gas fees and other tasks for use within decentralized finance.
This could be a major ETH price tailwind in the coming years.
Another major long-term tailwind would be the combined effect of ETH token burn Introduced by the August 2021 London hardfork and resulting in a drop in the ETH issuance rate “Sickness” Proof-of-Stake from last September’s Proof-of-Work.
In fact, the ETH supply is currently falling at a rate of around 1.5% per year.
However, it deflation The rate may accelerate in the coming months if network congestion increases and drives up network fees and ETH burn rates, due to the fact that ETH issuance rates have been hovering around 0.5-0.6% per annum in recent months. The range has remained largely unchanged.
In fact, the deflation rate reached 5.6% earlier this year due to a sudden increase in network activity, which triggered a short-term spike in network fees.