Ethereum Staking: Low Levels Seen as Bullish for the Network
Ethereum's low staking levels, currently at 14.3% of its total supply, are seen as a bullish sign for the network due to its good monetary policy and demand, despite not reaching the high levels of staking observed in other layer-1 networks.
Ethereum staking has recently garnered attention in the cryptocurrency world. However, despite the buzz, staking levels remain relatively low compared to other networks, representing around 14.3% of the entire Ethereum supply. This might not be a bad thing, according to some experts. In fact, Web3 investor Ryan Berckmans believes that Ethereum's low staking levels could be a bullish sign for the network.
The amount of Ethereum staked has dipped slightly over the past week following the Shapella upgrade and the opening of staking withdrawals. On April 16, Berckmans opined that Ethereum staking would not reach the high levels seen on other layer-1 networks.
Staking in the Crypto World
Staking is a process in which cryptocurrency holders lock up their assets, similar to a bank's fixed deposit account, to earn low but steady yields when there aren't many other investment opportunities available. Staking ratios on other networks, such as Cardano (ADA), Solana (SOL), TRON, Cosmos, and Polkadot, are significantly higher, with Cardano and Solana boasting staking ratios of 66% and 72%, respectively.
Ethereum's Low Staking Levels: A Positive Sign?
Berckmans contends that Ethereum's low staking levels could actually be a good thing for the network. One reason for this may be Ethereum's minimum viable issuance or dilution, which is a key factor when comparing Ethereum with other chains that intentionally over-dilute to manufacture a high proportion of staking.
Berckmans explained that if Ethereum's issuance were 50% per year, "obviously everyone is going to stake." However, the network's relatively low issuance rate means that its staking levels will likely remain lower than those of other networks. This could be seen as a reflection of Ethereum's good monetary policy and a sign of bullishness in the market.
Ethereum Use Cases and Demand
Ethereum's use cases and demand can be measured by various metrics, including network fees. As BeInCrypto reported, Ethereum has outperformed its competitors in terms of fees generated over the past six months, even in a bear market. Berckmans believes that the consensus among the Ethereum research and development communities is that low staking levels are a positive indicator for the network.
Liquid Staking Tokens and Ethereum Staking Levels
Berckmans also noted that the proliferation of liquid staking tokens is unlikely to push Ethereum staking levels to those of other networks. According to Token Unlocks, over one million ETH has already been withdrawn from the Beacon Chain since the Shapella upgrade. There are approximately 877,000 ETH in the pending withdrawal queue, but a large portion of this is due to the Kraken staking crackdown.
Despite the withdrawals, around 373,000 ETH has been deposited for staking, which means the staking balance has declined by only 646,700 ETH since Shapella. This indicates that, even with the availability of liquid staking tokens, Ethereum staking is not likely to reach the levels seen on other networks.
