While the Ethereum prices have marked an uptick recently, the same trend hasn’t been recorded in the network activity. However, as the network witnessed incoming upgrades, there has been an increasing interest in liquid staking tokens.
In its latest weekly report titled “The Surge in Liquid Staking,” Glassnode, an on-chain analytics firm, analyses various patterns witnessed amid the network upgrades. Notably, the increasing prices haven’t ended up in increasing activity as identified by relatively low gas prices, a proxy for blockspace demand.
However, data from Glassnode suggests that following the Shanghai upgrade, gas prices rose by 78%, compared the the 28% this week. Notably, the Shanghai hardfork enabled staked ETH to be withdrawn from the Ethereum consensus mechanism but rather than seeing a wave of withdrawals the upgrade motivated a fresh wave of deposits, as stakers find confidence in this new flexibility.
Data suggests that deposit activity which is identified by the transaction counts has reached a peak on 2-June, recording over 13,595 new deposits worth over 408,000 Ethereum. Compared to the Ethereum exchange deposit transactions, which have remained flat at around 30k deposits transactions over this period, the deposits have been dynamic.
Additionally, as Glassnode compares the burst of Ethereum volume staked vs exchange inflow volume, it highlights the increased staking. Analysts conclude that newly staked Ethereum has been higher, or equal in scale to exchange inflows since Shanghai went live.
Further, as the Glassnode’s report provides deeper insights about daily deposits by provider, some clear trends are highlighted. Notably, a very clear trend in favor of liquid staking providers becomes evident and among them Lido, a liquid staking platform, establishes its lead.
Sources reveal that Lido released its V2 update on 15-May which allowed node operators to withdraw staked Ethereum (stETH), enabling holders of Lido’s stETH token to exchange it for Ethereum. Following the release, there was a redemption of 400k stETH ($721M), resulting in a contraction of the stETH supply.
However, the huge wave of new Ethereum deposits have more than compensated the decline, pushing to a new all time high of 7.49 million stETH. Nonetheless, in comparison to other liquid staking competitors, Lido stands out as the clear leader in the sector with its supply 16 times higher than its nearest competitor.
Furthermore, Glassnode brings into picture Rocket Pool, an Ethereum 2.0 staking pool. To this, data suggests that the supply of rETH, the liquid staking token of Rocketpool, has been growing three times faster than Lido’s since the beginning of this year.
Interestingly, data highlights that the increasing demand for Lido’s stETH is not reflected in an increasing number of new token holders. Glassnode writes that while there is an increase in users of the staking tokens of Rocketpool and FRAX after the Shanghai upgrade, Lido has not registered a significant growth in new users.
Notably, new addresses holding stETH is oscillating between 230-590/day, which is more or less unchanged year to date. This leads us to the conclusion that many new deposits made via Lido are driven by existing stETH token holders increasing their exposure.
Overall, recent data suggests that Ethereum staking has not only remained resilient but has actually accelerated, touching all time high figures recently. As reported by Todayq News approximately over 20% of the Ethereum supply is now staked, marking a significant 5% increase in just two months and out of these, Lido has captured by far the largest market share, accounting for 7.5M in staked Ethereum.
Notably, the Ethereum Shanghai upgrade, which was completed in mid April allowed investors to complete the withdrawal leg of the staking yield trade. However, rather than witnessing a wave of withdrawals, deposits accelerated, with a very clear market preference for liquid staking tokens emerging. Nonetheless, the increasing interest in Ethereum staking marks a positive outlook for the asset. The increasing staking suggests deepening belief and trust in Ethereum’s potential in the DeFi sector.
