Analysis of Staking Conditions After Ethereum Shanghai Upgrade

Since Ethereum completed the Shanghai upgrade on April 12, it has been more than half a month since the opening of staking withdrawals. Before the upgrade, the market was concerned that opening withdrawals might lead to large-scale selling pressure, causing the price of the coin to drop. However, this situation did not occur. As of April 26, despite the total amount of staking withdrawals exceeding 1.7 million ETH, the recent ETH price has still shown an upward trend, surpassing $2100 for several days, reaching a new high since June 2022. At the same time, the total locked value in DeFi on Ethereum has remained basically stable, with LSD and LSDFi protocols continuing to be active.

This situation has raised new concerns in the market that the high stake rates of Ethereum may squeeze other on-chain activities. This article analyzes the staking and withdrawal status of Ethereum as of the upgrade on April 26, as well as the current staking rates offered by various staking institutions/protocols and the main application markets for staking certificates, leading to the following conclusions:

1. After the upgrade, the total amount of Ethereum staking withdrawals is approximately 1.7242 million ETH, with full withdrawals accounting for 44.23% and partial withdrawals accounting for 55.77%. The current total amount available for withdrawal is approximately 635.8 thousand ETH.

2. Full withdrawals occur approximately every 5 days with a larger scale of withdrawals; some withdrawals are significantly larger within the first 5 days (from the 12th to the 16th), after which it decreases noticeably.

3. The withdrawal structure reflects staking activities and market trends. Some withdrawals can be seen as passive withdrawals, while full withdrawals are considered active withdrawals. The current withdrawal structure shows that most institutions/protocols mainly engage in passive withdrawals, with staking expectations relatively stable. Passive withdrawals are more likely to flow back, which may be one of the reasons for the stable increase in staking amounts and coin prices.

4. After the upgrade, the total accumulated stake amount increased by 387,200 Ether, with a growth rate of approximately 2.13%. The average daily growth rate is around 0.15%, slightly higher than the average daily growth rate of 0.13% in the year before the upgrade, indicating that staking activities are generally more active.

5. The average expected annual staking yield of 18 staking institutions/protocols is approximately 5.45%, higher than the "benchmark interest rate" of 4.27%. By category, the average expected annual staking yield of LSD protocols is the highest, at about 6.17%.

6. LSDFi may affect the built-in negative feedback loop of Ethereum staking. When circular staking becomes a more profitable use case, the increase in the stake amount no longer leads to a decrease in staking rewards, which could have a profound impact on Ethereum's economic logic.

Stake Withdrawal Analysis

Ethereum staking withdrawals are divided into full withdrawals and partial withdrawals. During the 15 days from April 12 to 26, the total amount of staking withdrawals was approximately 1.7242 million ETH, of which full withdrawals accounted for about 722,700 ETH (44.23%) and partial withdrawals accounted for about 961,600 ETH (55.77%).

The withdrawal mechanism has a cycle of about 2-5 days. Some withdrawals are larger within the first 5 days (from the 12th to the 16th), after which there is a noticeable decrease. Full withdrawals occur approximately once every 5 days with significant amounts, such as on the 15th, 20th, and 24th, where daily full withdrawals exceed 160,000 ETH.

From the withdrawal situation of various institutions/protocols, a certain trading platform has withdrawn 598,800 ETH due to regulatory requirements, which is the highest. Next, a certain LSD protocol and a certain trading platform have also seen total withdrawals exceeding 230,000 ETH. In addition, several major institutions have total withdrawals exceeding 10,000 ETH. Most institutions/protocols primarily focus on partial withdrawals.

As of April 26, the total amount of withdrawable funds from various institutions/protocols and major token addresses is about 635,800 ETH. Among them, the withdrawable total from a trading platform is approximately 192,000 ETH, accounting for about 30.20%. Another trading platform also has a high withdrawable total, around 96,300 ETH, accounting for about 15.10%.

Stake Total Amount Changes

After the upgrade, the total amount of staked Ethereum increased from 18.1659 million ETH to 18.5531 million ETH, growing by 387.2 thousand ETH, with an increase of approximately 2.13%. The average daily increase was about 0.15%, slightly higher than the average daily increase of 0.13% in the year prior to the upgrade, indicating that staking activities have become generally more active.

The daily month-on-month changes tend to stabilize, and the range of changes shows a downward trend. Only on the 15th, 20th, and 24th did the cumulative staking amount have a negative daily month-on-month comparison, corresponding to the peak period of full withdrawals.

Specifically, among various institutions/protocols, after the upgrade, a certain LSD protocol attracted the most stake amount, approximately 207,400 ETH. Some Staking Pool institutions also attracted a considerable stake amount. Among exchanges, two major platforms attracted stake amounts of around 40,000 ETH.

Considering the net inflow of staked amounts, apart from a certain trading platform, another trading platform is the institution with the largest net outflow after the upgrade, with a net outflow of approximately 198,200 ETH. The net outflow from a certain LSD protocol and a certain trading platform is also relatively high. However, some StakingPools and LSD protocols have a large net inflow, reaching nearly 100,000 ETH at its peak.

Stake Yield Analysis

Currently, the expected annualized staking yield of Ethereum is approximately 4.27%, and after adjusting for returns, it is about 3.86%, showing an exponential decline trend.

In comparison, the staking product rates offered by various staking institutions/protocols are generally higher than the "benchmark rate." The average expected annualized staking yield of 18 staking institutions/protocols is approximately 5.45%. The LSD protocol has the highest average yield at about 6.17%; followed by StakingPool at approximately 5.81%; and the exchanges at the lowest at about 4.63%.

A certain trading platform offers the highest yield due to its marketing activities. In addition, there are several LSDs and Staking Pools with yields exceeding 7%, and the excess returns may come from MEV.

The LSD protocol is worth paying attention to. These protocols solve the liquidity problem of staked ETH by issuing staking certificates, and now these certificates provide users with higher yield possibilities through DeFi "Lego".

Another "Lego" worth paying attention to is re-staking, such as EigenLayer. These LSDFi integrate the liquidity of LSDs, providing users with ultra-high yield mining pools or collateralized lending stablecoins. However, they may threaten the built-in negative feedback loop of Ethereum staking. When circular staking becomes a higher yield use case, the increase in staking amounts no longer leads to a decrease in staking yields, which could have profound implications for Ethereum's economic logic.