Ether showing signs of strength as staking demand increases

Despite last week’s crypto market rout, on-chain metrics for the world’s second-largest digital asset show signs of increasing resiliency.

The introduction of the Shanghai-Capella fork in April has only increased demand for ether, bucking prior concerns it would have the opposite effect on price. Instead, as others rightly predicted, utility and demand have soared.

Total Value Staked for the asset has continued to rise, reflecting fundamental demand, Ho Chan Chung, CryptoQuant’s head of marketing, told Blockworks. The figure has risen 5.7% month-over-month, CryptoQuant data shows, from 26.3 million ether (ETH) to 27.8 million.

According to the popular Hildobby Dune Analytics dashboard, the current figure is about 26 million ether, but the trend is the same.

Read more: What effect could Ethereum’s Shanghai upgrade have on price?

Other experts agree. According to Eric Vander Wal, product head of Ethereum layer-2 scaling solution Mantle Network, the “healthy” increase in staked ETH indicates positive sentiment.

“This development has led to a proliferation of products built around staking services, where receipts of staked ETH allow stakers to retain liquid capital,” Wal said.

The growth in liquid staking tokens (LSTs) and related financial strategies, along with their integration with real-world assets, encourages investors to focus less on short-term volatility, Wal added.

ETH ended last week down 8.3% on August 20, following a bitcoin-led sell-off that sent shockwaves through the market and sapped $1.5 billion in that asset’s open interest (OI). A rebound on Wednesday saw the asset rise 2% to $1,690.

Even still, Chung believes ETH is undervalued, with its current realized price sitting slightly higher above $2,000 when compared to its spot market value, data shows.

Ether in custody

At the same time, ether’s Exchange Supply Ratio has fallen to its lowest level in five years. The ratio refers to the proportion of ETH held on exchanges compared to the total circulating supply.

“The declining exchange supply ratio and persistent staking commitment indicate not just resilience but a strategic understanding of ETH’s intrinsic value,” Chen Zhuling, founder and CEO of staking platform RockX told Blockworks.

“These factors seem to reflect a broader belief in Ethereum’s long-term potential, a conviction that goes beyond mere speculation and sees through the fog of short-term volatility.” 

Investors may be moving Ether off exchanges to hold in private wallets, a reflection of the belief in the asset’s staking fundamentals rather than seeking out trading opportunities, Chung added.

It comes as two significant events took place earlier this month that could encourage more people to use the Ethereum ecosystem, fintech firm BitOoda wrote in a recent note.

PayPal, the American payments giant, introduced a new stablecoin linked to the US dollar, issued on the Ethereum platform.

And Coinbase launched its mainnet for Base, an Ethereum rollup based on the OP stack — also viewed as a bullish catalyst for user adoption.

Updated Aug. 24, 2023 at 7:53 am ET: Added additional context.

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