Staked ETH Coins See $33 Million Inflow Thanks To Ethereum’s PoS Upgrade: Nansen

Summary:

• On-chain analytics startup Nansen reported massive inflows into staked Ether tokens following the Merge.
• Ethereum’s proof-of-stake upgrade successfully shipped on September 15, EWN reported.
• “Smart money” investors have deployed over $33 million into locked-up Ether coins in the past week alone.
• Ethereum’s upgrade dubbed the merge seemingly bolstered investors’ faith in protocols like Lido after a concerning depeg event back in June.

A Nansen report showed that staked Ether (ETH) tokens like Lido’s stETH have enjoyed inflows of over $33 million in the last seven days following the Merge, Ethereum’s pivotal transition from proof-of-work to proof-of-stake. The upgrade which was a success went live on September 15. 

Nansen’s report explained that “smart money” investors are going all in and splurging the big bucks on staked ETH coins to secure returns and play a critical role in Ethereum’s ecosystem following the recent PoS upgrade.

Unlike a PoW blockchain where miners receive rewards and incentives in exchange for network security and transaction validation, a PoS network relies on stakers with locked up tokens for such operations. In the case of Ethereum, staked Ether plays a key role in the newly upgraded chain.

Investors Held Their Breath After stETH Depegged In June

Similar to stablecoins which derive their value via a peg to another asset like the U.S. dollar, staked Ether also boasts a peg to the value of ETH. Notably, investors were left skeptical in the weeks leading up to the merge after Lido’s Ether product lost its peg back in June. 

Lido Finance offers liquid staking services for native tokens on blockchains like Ethereum and Polygon. Liquid staking allows stakers to deposit crypto like Ether and receive another token. Users can then deploy this token elsewhere while their staked crypto bears yields or returns. 

At press time, Lido boasts over 30% of the market share for Ethereum staking.

However, stakers were supposedly thrown into uncertainty back in June 2022 when stETH depegged from ETH. At the time, industry concerns were at their peak due to the crash of TerraUSD (UST), a stablecoin that lost its peg and triggered LUNA tumble as well.

stETH went as low as $0.93 for every dollar of ETH during the depeg period. Lido Finance assured stakers that the increased spread did not pose a serious threat to tokens staked through the service. 

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Lido’s staked product has since recovered and climbed back to $0.97 for every dollar of ETH.

Faith In Staked ETH Restored Post-Merge

After a successful Merge, investors looking to gain yields from staking their Ether have supposedly shown renewed optimism for leveraging services like Lido. Lido’s APR for staked Ether has also increased to 5.5% from 4 before the Merge.

Another service Rocket Pool also increased its APR per reports. Exchanges like Binance, Coinbase, and Kraken also have their respective staking services for Ether and other crypto assets.

Furthermore, mid-term stakers could target Ethereum for cumulative returns as the withdrawal option for staked ETH does not open till 2022. ETH developers plan to launch an update dubbed “Shanghai” to power staked ETH withdrawals.