Ethereum and Solana Attract More Stakers Despite Lower Yields
More ETH and SOL are being locked up, while yields are falling because of a larger staking base and lower fee and MEV income. For institutions, liquidity remains a major hurdle.
Key Takeaways
- Ethereum and Solana are seeing more tokens staked, despite falling staking yields on both networks.
- On Ethereum, 43.8 million ETH is locked up; on Solana, active stake rose to 440.5 million SOL.
- Institutional investors still care about liquidity, making liquid staking and custodians more attractive.
Crypto investors are locking up more and more tokens to secure blockchains, even as rewards decline. On Ethereum and Solana, the amount of staked tokens is growing, while yields are under pressure from a larger staking base and lower income from fees and MEV. As a result, staking is becoming more and more of a standard part of holding crypto, but at the same time the economics behind it are coming under pressure.
More ETH and SOL Locked Up
Ethereum now has more stake than ever in its history, said Kam Benbrik, head of onchain research at Bitwise. According to him, 43.8 million ETH is locked up, equal to 35.9% of the total supply. Active stake on Solana also climbed to 440.5 million SOL, according to Bitwise's Q4 staking report.
Still, gross annual staking yields fell on both networks. For Ethereum, the average in Q3 came in at 2.63%, down from 2.81% in Q2. On Solana, gross yield dropped to about 6%, from 6.38% in the second quarter. On Ethereum, the larger staking base was also joined by weaker fee income and lower MEV revenue.
Why Investors Keep Staking
According to Kraken subsidiary Payward, staking is often even more popular in weaker markets, because investors are more likely to hold onto their tokens then. In bull markets, that picture can flip, because more people want to keep liquidity on hand and transaction fees can sometimes support rewards. The industry view is that many investors see staking as an extra layer on top of a position they were already planning to hold anyway.
That accessibility has grown lately. Coinbase pointed to staking ETFs and digital treasuries as ways more retail and institutional investors are getting access. The fact that Ethereum has already been staked at scale for a longer time also helps lower the barrier, according to market players. Earlier this year, the Ethereum Foundation also staked 70,000 ETH, a sign that large players are also starting to see staking as more normal. Among institutions, Ethereum staking is also increasingly becoming a standard balance sheet item, as the shift to balance sheet items at institutions shows.
Liquidity Remains a Brake
For institutional players, liquidity remains an important issue. Kean Gilbert of the Lido Ecosystem Foundation said funds often cannot lock up everything, because ETH unstaking can take weeks while customer payouts need to happen faster. He estimated that an average European product stakes only 50% to 60% of its position.
That makes staking less simple than it first appears. Products with liquid staking, such as stETH, or solutions through custodians can help preserve access to capital. At the same time, the debate shows that higher participation does not automatically mean investors are willing to stay locked into longer withdrawal processes without limits.
