The successful implementation of the Shanghai upgrade and the reduction of liquidity risk has spurred a significant increase in institutional investment into Ethereum staking, indicating growing confidence and adoption from institutional investors.
The Ethereum community has been buzzing with excitement following the recent Shanghai upgrade, which has spurred institutional investment into staking. Early data from top institutional-grade ether staking service providers has revealed a significant increase in new deposits in April, with three times more inflows compared to the previous month, according to Michiel Milanovic, an analyst at ConsenSys, a leading Ethereum blockchain developer firm.
The Shanghai upgrade, also known as the Shapella upgrade, went live on April 12 and enabled the withdrawal of approximately 18 million tokens, equivalent to $35 billion, that were previously locked up in staking contracts. This was a highly anticipated event, as there were concerns that the unlocking could lead to a flood of selling pressure and a potential price crash for ETH.
However, contrary to these concerns, ETH’s price actually rallied to reach $2,100, its highest level in 11 months, defying expectations and demonstrating the resilience of the Ethereum ecosystem. Although the token has recently experienced a decline below $1,900, in line with the broader downward trend in the crypto market, the successful outcome of the Shanghai upgrade has instilled confidence in institutional investors.
One of the key benefits of the Shanghai upgrade is that it has reduced the liquidity risk associated with locking up ETH for staking. Previously, investors were wary of staking their ETH for an extended period of time due to the lack of liquidity, as their tokens would be locked up and inaccessible during the staking period. However, with the ability to withdraw staked tokens after the upgrade, the liquidity risk has been mitigated, making staking a more attractive option for institutional investors.
This increased confidence in staking is reflected in a survey conducted by Kiln, an institutional-grade staking service provider, which found that 68% of investors intend to start staking or increase their staked amount after the Shanghai upgrade. It is worth noting that this survey was conducted in February, prior to the upgrade, indicating that the actual number of investors interested in staking may be even higher now that the upgrade has been successfully implemented.
Kiln, along with other staking service providers, has seen a significant uptick in institutional investment since the Shanghai upgrade. Kiln’s co-founder and chief operating officer, Thomas de Phuoc, has reported a fresh wave of interest in staking, even from traditional finance (TradFi) firms.
Kiln alone has recorded $47 million (24,640 ETH) of new deposits since the upgrade, a substantial increase compared to previous months. Similarly, rival platform Staked.us has also experienced a surge in inflows, booking $111 million (58,592 ETH) in new deposits, which is more than double the amount of staking rewards withdrawn, as per Dune data.
The growing interest in staking from institutional investors is a positive sign for the Ethereum ecosystem, as it indicates increasing institutional adoption and recognition of the potential benefits of staking. Staking, which involves locking up a certain amount of ETH to participate in the network’s proof-of-stake consensus mechanism and earn rewards, has been gaining popularity as a way to earn passive income while supporting the network’s security and stability.
Following the reduction of liquidity risk after the Shanghai upgrade, more institutional investors are now considering staking as a viable investment option, which could further contribute to the growth and development of the Ethereum ecosystem. This surge in institutional interest in staking is promising for Ethereum, as it signifies a trend towards greater institutional adoption and a recognition of the advantages of staking in generating passive income and supporting the network’s operations.
In addition to the increased institutional interest in staking, the Shanghai upgrade has also demonstrated the resilience and robustness of the Ethereum network. Despite initial concerns about the potential negative impact of unlocking a large amount of staked tokens, the price of ETH has remained relatively stable and has even rallied to reach its highest level in nearly a year. This showcases the strong fundamentals of Ethereum and the community’s ability to successfully implement crucial upgrades without disrupting.