Ethereum Staking Popularity May Boost ETH Price, AMBCrypto Analysis Suggests
Ethereum Staking: A Catalyst for ETH Price Increases?
Ethereum staking has been attracting a lot of attention lately. But can it really help increase the price of ETH? According to an analysis by AMBCrypto, the steadily increasing staking deposits could actually make ETH harder to obtain for trading. This could, in turn, drive up the price of ETH.
Increased Demand for Ethereum Staking
Since the Shapella upgrade last April, interest in Ethereum staking has increased. Users have the option to withdraw their deposits at any time, which strengthens trust in the process and leads to more ETH being staked in the network.
The amount of staked ETH has risen from 15% at the time of the upgrade to 24.5% at the present time. Interestingly, demand for staking has increased, even though staking returns have decreased.
Decline in Liquid Supply
In contrast, ETH reserves on exchanges have been declining for several years, with a liquid supply of only about 11% remaining. The number of ETH coins available for active buying and selling has significantly decreased, leading to a scarcity in the market.
Why is this Important?
According to economic fundamentals, the scarcity of an asset increases its demand in the long term, provided demand remains constant. This has been particularly the case with gold and Bitcoin. Unlike Bitcoin, however, the supply of Ethereum is not fixed. Therefore, the continuously increasing staking deposits have contributed to making ETH harder to obtain for trading.
Furthermore, the increasing amount of staked ETH could lead to a decrease in ETH’s volatility. This could lead to more stable prices in the future, similar to a store of value.
At the time of publication, the price of ETH stood at $2,454, with double-digit gains in the past month. The strong monthly performance of the second-largest crypto asset has helped stabilize the crypto market, which otherwise experienced massive Bitcoin sell-offs following the launch of spot ETFs.
Ethereum staking could indeed contribute to increasing the price of ETH. By staking, ETH becomes scarcer and thus more valuable in the market. It remains to be seen how this development will affect the price of ETH in the future.