Ethereum’s transition to proof-of-stake is expected to happen before the end of this year. The Eth 2 Beacon Chain went live in December 2020, allowing Ether holders to deposit and stake ETH on the new chain. Data from Etherscan shows that over 13M ETH tokens have been staked. However, the majority of these staked coins are at a loss.
The majority of ETH stakers are at a loss
Ethereum investors deposit ETH to run a validator node. A minimum of 32 ETH is needed to become a validator. Staking on the Eth2 deposit contract can be done individually or using a staking pool or exchanges.
None of the staked ETH can be withdrawn so far. Despite this limitation, the number of staked Ether coins has been steadily growing since Beacon Chain went live. In November 2021, when Ether prices were at an all-time high of $4800, the total amount of staked ETH was worth around $39.7 billion. At the time, 8.02M ETH tokens were staked.
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The staked ETH on Beacon Chain is worth around $15 billion, despite the steady increase in inflows since November last year. The USD value of the staked ETH is 65.2% below the ATH.
ETH was ranked as one of the best staking coins, given the Ethereum network’s dominance over altcoins. However, the recent bear market has plunged ETH’s prices to 2020 lows. This has considerably slowed down deposits to the Ethereum 2.0 deposit contract.
Between 2020 and 2021, deposits of 32 ETH each ranged from 500 to 1000. According to Glassnode, the weekly deposits have been reduced to 122 per day. This is the lowest amount seen to date. The drop has been attributed to fear and uncertainty in the market. Moreover, the poor profitability of stakers has also been a major factor.
At the current Ether prices of slightly above $1000, stakers have an average holding loss of 55%. ETH 2.0 stakers are also sitting on the largest losses compared to the general Ethereum holders. Only 17% of the staked ETH is sitting on a profit.
Liquid staking protocols record growth
Investors using liquid staking protocols such as Lido have been in a better position to hedge against risks during the bear market. The demand for liquid staking derivatives has been notably high.
Liquid staking protocols allow users to derive liquidity from their staked assets. They allow investors to use their staked assets as collateral on decentralized finance (DeFi) applications.
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