Key Takeaways:

• Over 35 million ETH, worth roughly $84 billion, are now staked, 28.3% of the total supply.
• Liquidity has dropped to its lowest point since the Merge, raising volatility risk.
• Centralization fears resurface as the top 3 operators control nearly 40% of staked ETH.

Ethereum has quietly entered a new era. Over 35 million ETH are locked away in staking contracts presently, an all-time record that makes up just over 28.3% of the entire supply. According to the latest data from IntoTheBlock, that is the highest-ever ETH staked. At today’s going rates, that stash is worth roughly $84 billion.

Lido remains the largest player, validating roughly 25% of the staked ETH, roughly 8.7 million ETH. Binance and Coinbase follow, with roughly 7.5% each. The top three collectively occupy nearly 40% of all validator balances.

With growing centralization, the older fears about the decentralization of Ethereum have been rekindled, especially after the criticism that came from blockchain enthusiasts earlier, who had envisioned a much more decentralized chain.

For context, the total number of validators has surpassed 1.5 million, although their control has become increasingly centralized towards a select set of actors.

Since staking continues to be a baseline security mechanism for the Ethereum chain, the current setup would have the risk of exposing the system to governance and slashing vulnerabilities upon the emergence of synchronized validator action or disruptions of the chain.

Also Read: Ethereum Sees Explosive Momentum As Whales Inject $4.82 Million

With well over a quarter of the entire circulating supply of Ethereum effectively tied up in staking agreements, plus nearly 19% stored away in long-term holding accounts, the net result has been a decreasing free float; freely available ETH for trading on the open market has returned to levels not seen before the Merge.

The thinning float is already having a real-world impact upon DeFi markets. Lending rates for liquid staking derivatives like stETH, rETH, and frxETH have noted consistent rises through prominent lending protocols. As rising ETH goes illiquid for regular trade or collateral, liquid-based platforms will suffer from capital efficiency.

The IntoTheBlock report observed that thinner order books create starker price movements. Sharp drops and sudden rallies become more pronounced with smaller collections of coins available for trading. Aggressive traders prefer just that sort of atmosphere, while that goes with high risk for the retail participants.

Restaking has become increasingly popular with Ethereum, specifically through protocols like EigenLayer, with over $11 billion worth of total value locked. As much ETH sits idle, restaking offers new yield opportunities along with additional security layers for new applications.

But risk-reducing issues are gaining momentum. Risk-reducing governance votes will become increasingly significant this summer, potentially affecting restaking rewards and user activity.

Institutions, the US ETF issuers, are seeking the green light to divert ETH holdings to staking. Bitwise’s request was recently delayed by the SEC, the next decision arriving at the end of July. If the green light is given, staking would become a standard offering for ETH exposure through ETFs, condensing supply even further.

Also Read: Ethereum Sees Explosive Momentum As Whales Inject $4.82 Million