Institutional Investors Actively Involved in ETH Staking,60.6% Opt for Third-Party Platforms

A recent report by Blockworks Research reveals that 69.2% of institutional holders of Ethereum are engaged in staking the platform's native ETH token

Nearly 70% of institutional investors in Ethereum (ETH) are actively involved in ETH staking, with 60.6% of these opting for third-party staking platforms, according to a recent report by Blockworks Research.

The report found that 69.2% of institutional holders of Ethereum are engaged in staking the platform’s native ETH token. Of these participants, 78.8% are investment firms and asset managers.

Significantly, about 22.6% of these investors reported that ETH or an ETH-based liquid staking token (LST) accounted for more than 60% of their entire portfolio allocation.

The Ethereum staking landscape has seen a major transformation following the network's transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism during the Merge upgrade.

Currently, there are close to 1.1 million on-chain validators staking 34.8 million ETH on the network. After the Merge, Ethereum participants were able to withdraw their ETH only after the Shapella upgrade in April 2023. Following the initial phase of ETH withdrawals, the network has seen consistent inflows, indicating robust demand for ETH staking.

At present, 28.9% of the total ETH supply is staked, making it the network with the highest dollar value of staked assets, valued at over $115 billion.

The annualized yield from staking ETH is approximately 3%. As more ETH is staked, the yield proportionally decreases. However, network validators can also earn additional ETH through priority transaction fees during periods of high network activity.

Anyone can participate in ETH staking, either independently as a solo staker or by delegating their ETH to a third-party staking platform. While solo staking offers complete control over one’s ETH, it requires staking at least 32 ETH, equivalent to over $83,000 at the current market price of $2,616. In contrast, staking via third-party platforms allows holders to stake with as little as 0.1 ETH, though this necessitates relinquishing some control over their assets.

Ethereum co-founder Vitalik Buterin has recently highlighted the need to reduce entry requirements for ETH solo stakers to promote greater network decentralization.

At present, approximately 18.7% of ETH stakers are solo stakers, although this practice is losing favor due to the high entry threshold and the inefficiency of locked capital. The report notes that once ETH is locked in staking, it cannot be utilized for other financial activities within the DeFi ecosystem, such as providing liquidity to DeFi primitives or using ETH as collateral for loans. This presents an opportunity cost for solo stakers, who must also consider the dynamic network reward rates of staked ETH to maximize their risk-adjusted yield potential.

Consequently, third-party staking solutions are growing in popularity among ETH stakers, though these platforms—dominated by centralized exchanges and liquid staking protocols—raise concerns about network centralization.

Almost 48.6% of ETH stakers using third-party platforms rely on integrated services like Coinbase, Binance, and Kiln. The report also identifies key factors driving institutional investors to use third-party staking platforms, including platform reputation, supported networks, pricing, ease of onboarding, competitive costs, and platform expertise.

Despite the evolving Ethereum staking ecosystem, this growth has not yet significantly influenced ETH’s price. ETH has underperformed against BTC for an extended period but recently gained traction following the US Federal Reserve’s decision to cut interest rates. Some crypto research firms remain optimistic about ETH’s potential to rebound against BTC later this year. As of press time, ETH is trading at $2,616, up 0.8% in the past 24 hours.

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