Ethereum staking continues to grow as more and more investors lock up their ETH in anticipation of future gains. However, recent research shows that despite the recent highs in ETH price, more than half of all staked Ethereum is still underwater in terms of gains. This is due to the fact that 60% of all staked ETH was locked in at a price of $1,600 or higher, while the remaining 40% that was staked at lower prices remains in profit.
The current bear market has played a significant role in the underwater staked ETH, which worsened last year when ETH prices plunged as low as $1,000, leaving over 80% of staked ETH in the red. The situation has improved significantly since then, but a lot of Ethereum was staked at higher prices, between $2,500 and $3,500, and it could be a while before those levels are revisited as the bear market continues.
Despite this, Ethereum staking is still seen as bullish in the long term, with analysts predicting a huge boost for liquid staking platforms, which offer better yield opportunities than staking directly. The approaching Shanghai upgrade, which is set to enable the phased release of staked Ethereum by the end of March, is also expected to increase the demand for such platforms.
Moreover, the growing demand for Ethereum has led to an increase in network activity, with the total value locked in Ethereum-based decentralized finance (DeFi) protocols surging to an all-time high of $220 billion in early February. This represents a massive 276% increase from the $58.5 billion total value locked in DeFi protocols at the start of the year. DeFi protocols are built on top of the Ethereum blockchain, allowing users to access a range of financial services in a decentralized manner, including lending, borrowing, and trading.
The growth of DeFi and the increasing demand for Ethereum has also fueled the rise of other blockchain projects, including Solana, Avalanche, and Polygon. These platforms are designed to offer faster transaction times and lower fees compared to Ethereum, which has faced issues with congestion and high fees during periods of high demand.
However, Ethereum remains the second-largest cryptocurrency by market cap, valued at over $190 billion at the time of writing. The deflationary nature of ETH issuance, with the supply declining by around a quarter of a percent per year, could make Ethereum staking a profitable venture in the long term.
While the increasing amount of staked Ethereum is a positive sign for the cryptocurrency’s long-term growth, the fact that more than half of it remains underwater in terms of gains made could be cause for concern for some investors. However, the situation has improved from last year when the vast majority of staked ETH was underwater. With the approaching Shanghai upgrade and the phased release of staked Ethereum, analysts predict a boost for liquid staking platforms, which offer better yield opportunities than staking directly. As the cryptocurrency market continues to evolve, it will be interesting to see how Ethereum and other digital assets perform in the coming months and years.