Third Round of ETH Withdrawals Sees Roughly Equal Amounts of Deposits

Updated: 26 April 2023

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Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

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According to data from the analytics platform Nansen, Ethereum staking withdrawals have entered their third round. Although the ticker for Ether (ETH) is down at $1,817, staking deposits have almost equaled it.

Staked ETH Reaches All-Time High Before Recent Withdrawals: Nansen Report

Nansen reported that the total amount of staked ETH reached an all-time high before the last wave of withdrawals began. On April 24, the figure hit 18,796,663 ETH, valued at around $34.5 billion. This represents 14.5% of the total Ether supply, although the current figure is slightly lower than the peak because of the EIP-1559 burning mechanism, which has caused a decline of 114,077 ETH (around $209 million) since the Merge in September.

Third round of principal withdrawals underway

Again largely Kraken, bringing their total principal withdrawn to almost 400k

Source: @nansen_ai pic.twitter.com/jVnnxnl5Jf

— Martin (@themlpx) April 24, 2023

Despite concerns over a potential massive exodus of staked Ethereum following the Shapella upgrade, Token Unlocks has reported that 1.66 million ETH have been withdrawn since April 12, but 1.07 million ETH have also been deposited, showing that there is still a significant appetite for staking Ether.

The withdrawals started ramping up on April 24 and into April 25, andmuch of these withdrawals were made by the crypto exchange Kraken. Nansen defines a “round” as the number of days taken to process partial withdrawals and rewards, and currently, it takes just under four and a half days.

On April 24, 61,608 ETH in principle and reward withdrawals was made, but there were 63,009 ETH deposits. As a result, there has been zero change in the balance of staked ETH over the past 24 hours.

Ether deposits (shown in blue) since April 18. Source: Nansen

The United States Securities and Exchange Commission(SEC) enforced a fine against Kraken in February, accusing the crypto exchange of selling unregistered securities and forcing it to halt its Ethereum staking services. As a result, a significant portion of the ETH that was withdrawn earlier came from Kraken wallets as stakers received their assets back.

Alternative Strategies for ETH Staking: Lido Finance and Auto-Compounding with Curve Finance and Frax-Based Tokens

Nansen’s data shows that 2.3% of the total withdrawable ETH remains with Kraken. Currently, there are ‌632,651 ETH in the pending withdrawal queue, valued at around $1.16 billion at current prices. Just what is ETH staking, and in what ways can you participate? For those with the personality of an ox who are dependable but suspicious of new ideas, staking directly with Lido may be a suitable option.

Lido Finance is the largest liquid staking derivative protocol and DeFi protocol in terms of total value locked and market capitalization. Lido takes the investor’s ETH and stakes it using a team of verified validators, pooling the yield and distributing it to the DAO, validators, and investors.

If you are looking for an alternative to direct staking with Lido, auto-compounding strategies may be worth considering. One strategy involves providing liquidity to Curve Finance and locking up the liquidity pool (LP) tokens.

When using Curve Finance, it is recommended to use Frax-based tokens, as they often have the best rewards and liquidity. By staking some ETH with Frax Finance, investors receive their LSD, called Frax ETH, for free.

Frax Finance maintains a highly liquid market for frxETH by running an LP on Curve Finance, which offers an additional APY of up to 5.5% on top of the yield earned by frxETH. This strategy is suitable for investors who are honest, prudent, and willing to take on some risk, including the possibility of undiscovered smart contract bugs, DAO hacks, or penalties imposed by Ethereum on validators.