Share:

Centralized crypto exchange giants Binance and Coinbase have suffered large outflows of staked ether (ETH) since Ethereum’s Shanghai upgrade as investors flock to decentralized rivals, blockchain data shows.

Coinbase’s staking platform has endured a $367 million net outflow of staked ETH since April 12, as withdrawal requests – including reward withdrawals and full exits – outpaced new deposits, according to a Dune Analytics data dashboard. The world’s largest crypto exchange Binance’s staking service has seen a net outflow of $340 million.

Decentralized liquid staking protocols, on the other hand, have enjoyed a sharp rise in deposits. Frax Finance and Rocket Pool, the two of the largest gainers, have recorded net inflows of $56 million and $68 million, respectively.

The development has followed Ethereum’s highly anticipated Shanghai upgrade on April 12, which allowed investors to withdraw some $35 billion of tokens previously locked up in staking contracts. Analysts predicted that the event would be a major milestone for the $225 billion network, likely boosting staking participation, attracting institutional investors and reshuffling the competition between staking services.

The upgrade has been “a major catalyst” for decentralized liquid staking solutions, Ahmed Ismail, founder and chief executive of liquidity aggregator platform FLUID Finance, said.

Liquid staking protocols issue a derivative token that represents the amount of locked tokens and lets investors access decentralized finance (DeFi) services such as lending and borrowing.

Boosted by new deposits, the amount of ETH staked on Frax and Rocket Pool has grown 32.5% and 31% in the past 30 days, respectively, according to DefiLlama data.

Lido Finance, the largest decentralized liquid staking protocol with some $11 billion of deposits, has also booked some $28 million (15,208 ETH) more deposits than withdrawals since April 12.

Regulatory concerns, higher yields

Regulatory risks and aversion to centralized crypto platforms after last year’s bankruptcies are likely among the reasons that drive investors to decentralized staking protocols, Tom Wan, an analyst at digital asset investment firm 21Shares, said in a note.

This February, crypto exchange Kraken agreed to shutter its staking service after the U.S. Securities and Exchange Commission (SEC) charged the exchange for offering unregistered securities. Liquid staking tokens surged following the settlement as the SEC appeared to come after staking service providers, benefitting decentralized liquid staking.

Regulatory pressure on centralized entities may continue, John “Omakase” Lo, head of digital assets at investment firm Recharge Capital, said.

“The uncertainty isn’t good for retaining deposits,” he added.

Investors could also be swayed by higher staking rewards that decentralized protocols can provide. Currently, Coinbase and Binance offer around 4% annualized reward for staking ETH, whereas decentralized protocols Lido Finance and Frax Finance provide 5-7% rates.

“Centralized liquid staking usually has a lower yield profile. Compliance and staffing all add up,” Omakase said.

ETH

Market share of ETH staking protocols (Hildobby.eth/Dune Analytics)

Despite recent outflows, Binance and Coinbase remain among the largest ETH staking providers. However, Binance’s market share fell to 4.5% from 5.7% a month ago, while Coinbase’s share dropped to 12.3% from 13%.

The two exchanges face further outflows, data by blockchain intelligence firm Nansen shows. Coinbase has some $191 million of staked ETH waiting to be withdrawn, while Binance has $41 million in withdrawal requests in its queue.


All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.

Join Telegram

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

Bitcoin tags $60,000 for the first time in more than two years

Bitcoin tags $60,000 for the first time in more than two years

Bitcoin hit $60,000 after more than two years below this level. BTC liquidations have surpassed $277 million in the last 24 hours. This massive rally in the pioneer cryptocurrency could be attributed to the spot ETF approval.

More Bitcoin News

Arbitrum price resumes rally with Web3 gameathon plan for March

Arbitrum price resumes rally with Web3 gameathon plan for March

Arbitrum, an Ethereum Layer 2 scaling solution, has announced an event for Web3 gaming. The event is likely to attract community members, delegates and Web3 gamers. This could positively influence Arbitrum adoption and is likely to boost ARB gains. 

More Arbitrum News

Ethereum price hits new yearly high at $3,369 as staked Ether rises to 26%

Ethereum price hits new yearly high at $3,369 as staked Ether rises to 26%

Ethereum price has climbed to a new 2024 high of $3,369 on Wednesday. Bitcoin’s rally to $59,000 and the upcoming Dencun upgrade activation on mainnet have likely catalyzed Ethereum’s price gains. 

More Ethereum News

XRP climbs to $0.58 as SEC pushes for deadline extension in Ripple lawsuit

XRP climbs to $0.58 as SEC pushes for deadline extension in Ripple lawsuit

XRP price rallied on Wednesday in response to the Securities and Exchange Commission’s (SEC) push to delay the remedies briefing deadline in its lawsuit against the payment remittance firm. 

More Ripple News

Bitcoin: BTC likely to correct to $50,000 soon

Bitcoin: BTC likely to correct to $50,000 soon

Bitcoin price has formed a potential top signal that forecasts a sell-off. The weekly chart also points to a bearish divergence, which adds credence to the bearish outlook. Investors can expect BTC to consolidate between the $52,062 to $45,160 levels.

Read full analysis

BTC

ETH

XRP