As more Ethereum (ETH) holders queue up to exit staking, a cryptocurrency expert warns that this trend could exert significant selling pressure on Ethereum.
According to data from validatorqueue.com, as of Friday, the number of validators exiting the Ethereum blockchain queue reached 855,158 ETH, a historic high, with the total value of these tokens approximately $3.7 billion.
Staking refers to digital asset holders locking up tokens to secure the blockchain network, earning rewards in return. In uncertain market environments, stakers may opt to unlock and retrieve their tokens, converting them into relatively low-risk assets or cashing out directly.
The Ethereum network limits the amount of ETH that can be unstaked within a certain timeframe, designed to maintain network stability and prevent a large-scale simultaneous exit by validators, which could undermine the blockchain’s consensus mechanism. Currently, it is estimated that the unstaking queue will take 15 days to fully clear.
Bitwise senior investment strategist Juan Leon told Decrypt that the growing unstaking queue may be driving the recent pullback in ETH.
Leon explained that the unstaked Ethereum could negatively impact prices, especially when staking derivatives (such as stETH) are trading at a discount. He stated:
He added that as the unstaking queue increases, if the cost of borrowing ETH surges, some trades may also be forced to unwind.
When this happens, “the leveraged ‘stETH circular trading’ through DeFi liquidity pools will no longer be profitable.” Leon pointed out: “Traders unwind operations by exiting positions and selling ETH to repay loans, resulting in synchronized selling pressure.”
Shortly after ETH approached its historical high of $4,878 set in November 2021 on Thursday, market activity for unstaking ETH began to increase. Since then, ETH has retraced its gains, influenced by rising geopolitical uncertainty and a higher-than-expected U.S. Producer Price Index (PPI). As of the time of writing, Ethereum was trading at $4,325, down 2.6% in the past 24 hours.
Despite external concerns regarding the Ethereum validators’ exit queue, Leon reminds us that an increase in ETH waiting to be unstaked does not necessarily mean that the token’s price will continue to decline. He stated: