Ethereum’s network is currently experiencing a significant rise in validators, indicating a renewed interest in staking ether (ETH), despite yields remaining under 4%. The validator entry queue has reached 7,045, the highest number since October 6, with over 225,000 ether, equivalent to approximately $562 million, waiting to be staked. ValidatorQueue data suggests that this backlog could be cleared within 48 hours.
The Ethereum protocol restricts the entry of new validators per epoch—a period required to process blockchain blocks—to avoid congestion, resulting in the current backlog. Validators are crucial to the Ethereum proof-of-stake consensus blockchain, as they stake a minimum of 32 ether to assist in network operations, earning returns comparable to interest from traditional fixed-income assets.
David Lawant, head of research at FalconX, has highlighted this spike in Ethereum staking activity as an early sign of the network’s revitalization. This comes despite the fact that the annualized yield on staked ether has seen little to no increase, remaining between 3.5% to 4% for several months. This rate offers a marginal premium over the 4.17% yield on the 10-year U.S. Treasury note, considered a risk-free investment benchmark.
The increased validator registrations follow the notable surge in interest post-Ethereum’s Shapella upgrade last April, which introduced the ability to withdraw staked ether, thereby reducing the risks associated with staking.
The validator exit queue also saw a temporary increase in early January when Celsius, the now-defunct crypto lender, announced its plan to unstake its ether holdings.
Despite the uptick in staking, ether’s price performance last week, with a nearly 10% increase, lagged behind bitcoin’s 14.5% gain. The looming uncertainty regarding the launch of U.S.-based spot Ethereum ETFs and the need for clearer SEC guidance on ether’s categorization may be causing hesitation among traders.
Lawant mentioned that the crypto community is closely watching the developments around the potential Ethereum ETFs and their staking components. The evolution of amendments to Ark/21Shares’ S-1 form in the months leading to May 23 will provide insights into whether staking will be a feature of these ETFs, potentially influencing Ethereum’s market dynamics.
