Following the Shapella Upgrade in April 2023, Ethereum (ETH) has seen a notable increase in staking interest from both long-standing investors and newcomers. The upgrade provided the freedom to withdraw staked assets at any time, which has fostered a secure environment and enabled more ETH to be staked on the network.
According to CryptoQuant data, the percentage of the total circulating supply of ETH staked has risen from 15% before last year’s upgrade to 24.5% at the time of writing. Despite the increase in staking demand and the corresponding decrease in returns, investors continue to stake their ETH.
Validators have seen their annual financial returns decrease from 5.2% in June 2023 to 3.64% currently. Meanwhile, ETH reserves on exchanges are at a multi-year low, with only about 11% of the liquid supply available, indicating a scarcity in the market.
The scarcity of an asset can lead to price increases if demand remains consistent or grows, as seen with assets like gold and Bitcoin (BTC). However, unlike Bitcoin, Ethereum’s supply is not capped, making the increasing staking deposits a complex situation for investors and market analysts.
The reduction in ETH’s circulating supply due to staking could eventually lead to lower volatility and potentially increase its value. On-chain analyst LeonWaidmann suggests that the current scarcity could precede a significant price surge for ETH, which is currently priced at $2,474, representing a modest 0.13% increase over the last 24 hours according to 21milyon.com data.