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Will stakers sell their ETH after the Merge?

More than 13 million ETH are now staked in Ethereum staking.

By Mike Hesp
• 5 min read
Will stakers sell their ETH after the Merge?

More than 13 million ETH are now staked in Ethereum staking. Here’s what happens to the tokens after the Merge.

Since Ethereum 2.0 Phase Zero kicked off, thousands of investors have deposited their Ether directly into the Ethereum Deposit Contract via Coinbase, Binance, and the like, or via decentralized options like liquid staking providers Lido (LDO) or Rocket Pool (RPL).

A proud 13.326 million Ether, worth about 24.56 billion US dollars, is now being staked. This makes Ethereum the largest Proof of Stake (PoS) blockchain in the entire crypto space.

Currently, investors can’t transfer these staked ETH. That means every Ether that’s staked reduces the total Ethereum supply. Staking therefore directly supports a higher ETH price if demand for Ether stays the same or rises.

Staked ETH can’t be cashed out immediately

Ethereum stakers can’t sell their Ether right after the Merge. Stakers can only withdraw 6-12 weeks after the upgrade. The Ethereum development team put this precaution in place on purpose to prevent a sudden sell-off.

As a result, there shouldn’t be a mass sell-off of Ether after the Merge. But what happens when withdrawals from the staking contract are released?

Maybe there will be a sell-off, but the Ethereum developer community has put safeguards in place so not all ETH can be sold at once.

Instead, there will be a queue that determines how quickly investors can withdraw their ETH from the Deposit Contract. This mechanism should keep the Ethereum 2.0 blockchain stable and prevent the network’s safety from being jeopardized by high volatility.

How risky can the unwind be?

The amount of Ether that can be withdrawn is capped at X/ETH per day, where X equals the total number of validator nodes divided by 65,536. The result is rounded down to the nearest whole number.

Currently there are 416,237 Ethereum validators on Ethereum 2.0. To get validators per epoch (time unit on the Ethereum PoS chain), divide by 65,536 and floor: 416,236/65,536 ≈ 6 validators per epoch.

So there are 6 validators per epoch. An epoch on the Ethereum blockchain is 6.4 minutes, yielding 225 epochs in 24 hours. Per day, 1,350 validators, each with 32 ETH, could theoretically withdraw a total of 43,200 ETH from the Staking Contract.

At current ETH prices, that could mean about $80 million per day could be withdrawn from the staking contract. With daily trading volume averaging more than $15 billion, the impact of these potentially new ETH tokens hitting the market would be negligible for the price of the second-largest cryptocurrency.

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