Published 1 year ago • 5 minute read

Staking deposits surpass withdrawals as the Ethereum market prepares for fluctuations

Ethereum is the second most popular cryptocurrency in the world and the largest by market capitalization after Bitcoin. And while it is still behind BTC, there’s no denying that it has enjoyed a growth rate unlike anything else in the asset market. Over the past year, the market navigated some difficult times as it had to deal with a sudden loss of value. Prices dropped by over 65%, and many investors abandoned ship, fearing to lose even more capital. However, those who could hold fast and watch everything unfold finally saw an amelioration at the beginning of 2023, when values started on an ascending path.

Regardless, the prices are not yet back to their 2021 levels, and there’s a lot of growth that remains to be done. Market volatility remains a problem, and investors are looking for the best options to purchase cryptocurrencies, including how to buy Ethereum with a debit card. As the market changes, traders must find the best way to ensure their portfolios stay secure and that they don’t lose capital.

Deposits VS Withdrawals 

The Ethereum blockchain is widely recognized for its technological advancements, many of which have led researchers to believe that, in the future, the tech can potentially be employed in traditional industries as well. The most recent upgrade was the long-awaited Shapella, which launched in mid-April, with a mild delay compared to its initially announced date. The purpose of the update was to make transactions faster and more efficient, as well as to enable the withdrawal of staked Ether hosted on the platform.

Initially, many viewed the move with skepticism, expecting it to cause chaos within the larger market by enabling a large number of coins to pool in. This could create more volatility, which is not good in any context but which would currently be very bad news and could severely impact the blockchain and ETH’s stability.

Luckily, their worst fears haven’t come to pass. While investors did extract a large portion of their withdrawals, recent figures show that ETH deposits have recently begun exceeding the number of withdrawals. Since the Shanghai upgrade went live, approximately 2.28 coins have been withdrawn. In comparison, roughly 2.32 have been deposited. While the difference doesn’t seem all that much, it clearly indicates future market trends.

This trend has been growing since May 2023, when, according to research, over 200,000 were deposited in twenty-four hours at the beginning of the month. At the same time, only 10,000 ETH were withdrawn.

Liquid staking 

Soft staking, also known as liquid staking, has become more visible recently and benefited from the shift between deposits and withdrawals as well. Liquid staking differs from traditional staking as it uses a different type of technology available on newer smart contract protocols. It allows users to access their funds for several cryptocurrency-based activities that enable them to earn rewards from the initial deposits. Within the Ethereum blockchain, the protocol facilitates direct staking on the platform. The special token is minted by the same system that allows users to have access to the liquid funds during the staking.

With the latest changes in the blockchain, liquid staking benefits benefited quite a lot, rising by nearly $17 billion. As of now, they are the largest decentralized finance category. The protocols are solely responsible for a large part of the staked deposits, particularly in the aftermath of the Shanghai hard fork.

Possible volatility 

The fact that the cryptocurrency environment is dealing with volatility should come as no surprise. Investors acknowledge the potential issues of fluctuating prices and try to mediate the adverse effects by adjusting their strategies depending on the market changes and price charts. However, the latest data shows that there’s likely to be additional volatility soon and that investors should be mindful of their choices. According to analysts, the deposits have hit an eight-month high recently, which could foreshadow steep fluctuations in the ecosystem.

Over the past couple of weeks, whale activity has also been quite intense. Those holding between 1,000 and 10,000 coins have offloaded massive amounts of crypto and tokens, leading to price suppression. And although the Shanghai upgrade has been highly anticipated, it ultimately didn’t cause the bull run many expected, as the price only grew by approximately 3% since April. Many expect something similar to the collapse of several exchanges during the past year, while others believe that the situation is too different for any similarities.

Yet, it is essential to remember that nobody can accurately predict the price of any cryptocurrency. So, it is still unclear how the values will switch in the near future. Data suggests that the only thing investors can be sure of is higher selling pressure. 

Meme coin craze 

One of the main reasons why the cryptocurrency space has remained visible and relevant despite the many changes it had to face is that it brings constant novelty that keeps investors engaged and interested. One of the biggest hypes is that of meme coins, and the crypto environment has recently been dealing with a brand new one. The Pepe coin has become astronomically popular seemingly overnight, allowing investors to rake in considerable amounts of revenue.

The validators at the core of the Ethereum blockchain have seen the overall profitability increase as well, as actions performed on the blockchain recorded a sudden surge. The total revenue derived from this period is close to matching the one the validators made last year in the frenzy that accompanied the collapse of some high-profile crypto exchanges.

Gas fees 

One of the downsides of the hype, however, has been the considerable climb in gas fees. The only time when the transactional costs were higher than during the Pepe craze was during the bank run of SVB and when the USDC stablecoin became less valuable than its pegged asset. While higher gas fees aren’t good for individual traders, as it means they need to pay more for the same transaction, it is good news for validators, who can increase their revenue in this manner.

Therefore, to perform successful transactions, it’s important to keep an eye on the market to determine the best times to buy or sell.



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