Do Ethereum users prefer staking over trading?

A trend indicated that more and more people were taking ETH out of the market and using it as an investment to earn yields in staking.

• Given the current scenario, staked ETH would continue to surpass ETH on exchanges.
• Staked ETH accounted for 20% of total circulating supply.

Users have shown heightened interest in Ethereum [ETH] staking since the Shapella Upgrade went live on the mainnet in April.

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Staking, which was originally thought to be a risky proposition owing to withdrawal ambiguity, got a boost after unlocking ETH was permitted.  After a successful test of the withdrawal mechanism initially, users came back to restake their ETH.

Since Shapella, staked ETH supply has jumped by 26%.

The positive sentiment was corroborated by data from blockchain analytics company Nansen. The firm took to Twitter to reveal that staked ETH supply exceeded ETH’s liquid supply on exchanges in June, with a forecast that this trend would likely continue in the near future.

Staking>> Trading

There has been a sharp rise in the number of ETH staked with deposits consistently outpacing withdrawals over the last three months. At the time of publication, the total amount locked equated to 20% of ETH’s total circulating supply, as per a Nansen dashboard.

On the other hand, there has been a 31% fall in ETH balances on exchanges since November 2022. As evident in the graph below, the decline has accelerated since Shapella was introduced. At the time of writing, about 22.8 million ETH was available for trading on exchanges, amounting to 19% of all tokens in circulation.

The trend indicated that more and more people were taking ETH out of the market and using it as an investment to earn yields. And even though staking rewards have progressively reduced over the past two years, the clamor for staking has increased.

Source: Nansen

Most stakers were in losses

Another possible reason behind the persistence with staking could be that several stakers were underwater on their investments. As per data fetched from a Dune dashboard, about 60% of the stakers were in losses since they locked their ETH on the network.

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The majority of this staking occurred at the price levels of $1,600 and $3,500, during the peak of the 2021 bull run. However, at the time of publication, ETH’s market price was $1,886.48, as per CoinMarketCap.

The underperforming market encouraged stakers, especially the experienced ones, to continue hunting for rewards in staking, rather than unstaking and selling their holdings at losses in the market.