A long-dormant Ether whale who participated in the Ethereum Initial Coin Offering (ICO) might be about to stake a massive 32,015 ETH tokens, according to on-chain analytics-focused Twitter account @lookonchain.
The ICO participant staked 48,992 ETH back in October, ending six years of dormancy at the time. According to @lookonchain, the whale transferred 32,015 ETH tokens to a new address earlier this week, which they think the whale may be about to stake.
The Ethereum ICO whale received 120,000 ETH tokens at the genesis of the Ethereum mainnet in 2015 across three separate wallets. If they do stake a further 32,015 tokens, that means the whale will have staked 67.5% of the 120,000 tokens they received at the Ethereum ICO.
More ETH Shifts Towards Staking
The above-noted whale’s (possible) shift towards staking a greater portion of its ETH holdings reflects a shift in the ETH market. ETH staking first became possible on the beacon chain back in late 2020.
But up until now, most ETH owners have opted not to stake their tokens, despite attractive yields of currently around 7-8% for node operators and 4-5% for staking pool participants.
That’s because, at the moment, staked ETH tokens cannot be withdrawn. According to Ethereum, the lack of flexibility in staked ETH withdrawals was to protect the network's integrity as it transitioned from proof-of-work to proof-of-stake.
But that transition has now been completed (the “Merge” took place last September). And Ethereum developers are working on the blockchain ecosystem’s next big upgrade, the so-called “Shanghai” hard fork that is currently scheduled to take place before the end of March.
The upcoming upgrade will allow staked ETH to be withdrawn for the first time. While withdrawals won’t be immediate, the shift towards greater withdrawal flexibility seems to be attracting more ETH owners to staking.
Since September 2022, when the merge took place, the number of staked ETH has risen by about 2.7 million ETH to 16.2 million, meaning that currently around 13.5% of the ETH supply is locked in staking. That’s still a far cry from staking participation on Ethereum rival Cardano’s blockchain, which has a participation rate of over 70%, thanks for its flexible withdrawals. But the trend seems to be towards rising staking participation.
How Higher Staking Participation Can Boost ETH’s Price
Staking itself is a positive for ETH’s price – why own a cryptocurrency that offers no yield whatsoever when you could own a cryptocurrency that offers a predictable yield, many crypto investors may ask.
But up until now, the lack of flexibility in withdrawals was deterring investors who value liquidity over a steady yield. Now ETH investors can have (closer to) both. As ETH staking participation rises, that should boost ETH for a few reasons.
First of all, it encourages HODLing, with HODLers guaranteed to get at least a 5-8% return (depending on whether they are a node operator or staking pool participant) on their staked ETH, regardless of market conditions.
Assuming a majority of those attracted into staking given its new flexibility do end up HODLing their ETH tokens, this also results in a reduction of the generally available supply of ETH tokens. Ether buyers will essentially be fielding sell offers from a smaller pool of willing sellers.
Many analysts think that a shift to increased staking participation could be a key driver of long-term appreciation in the price of ETH. As crypto matures as an asset class and price fluctuations tend towards that which is normal in traditional financial markets, many expect major financial institutions to become increasingly drawn to ETH staking, with some referring to ETH as the bond of the crypto universe.
Other drivers of long-term ETH appreciation are expected to be factors such as the blockchain’s continued efforts to upgrade (sharding could make Ethereum more scalable later this year), its continued mainstream adoption (non-zero balance addresses should soon hit 100 million) and the fact that it is now a deflationary asset.