Ethereum Holders Unstaking Tokens, Raises Sell Pressure Concerns
Ethereum holders are increasingly moving to unstake their tokens, a trend that may place substantial sell pressure on the cryptocurrency, according to one crypto expert.
On Friday, the Ethereum blockchain’s validator exit queue reached 855,158 ETH—the highest recorded to date, as reported by validatorqueue.com. These tokens were valued at a total of $3.7 billion as of late Friday, according to data provider CoinGecko.
Staking involves digital asset holders locking their tokens to help secure a blockchain network while earning rewards. Amid uncertain market conditions, stakers might opt to unlock and reclaim their crypto by transferring it to relatively safer assets or cashing out.
The Ethereum network has a limit on how much ETH can be unstaked at any one time. This limit is intended to uphold network stability by preventing mass validator exits, which could disrupt the blockchain’s consensus mechanism. At present, it is estimated that the queue will take around 15 days to clear.
The increasing queue of soon-to-be-unstaked ETH may be contributing to the recent decline in the asset’s price, Bitwise Senior Investment Strategist Juan Leon informed Decrypt. The second-largest cryptocurrency by market cap has lost hundreds of dollars in recent days after nearly reaching a new all-time high.
The unstaked Ethereum queue could negatively impact ETH’s price, especially if staked ETH trades at a discount compared to ETH, he explained.
- “Tokens like stETH can trade at a discount. That discount reduces their value as collateral, triggering risk cuts, hedges, or even liquidations that lead to spot ETH selling,” Leon noted.
He further added that some trades might unwind as the unstaking queue expands, particularly if the borrowing cost for ETH rises.
When this happens, “leveraged ‘stETH loop’ trades via liquidity pools on DeFi protocols stop being profitable,” Leon remarked. “Traders unwind by exiting positions and selling ETH to repay loans, creating synchronized sell pressure.”
The increased efforts to unstake ETH followed shortly after the token came close to its record price of $4,878, which was reached in November 2021, according to CoinGecko. Since then, the altcoin has retreated, influenced by increasing geopolitical uncertainty and a producer-price-index report from the U.S. that exceeded expectations.
Despite worries over Ethereum’s validator exit queue, Leon warned that an increase in ETH awaiting unstaking does not automatically imply a continued decline in the token’s price.
- “Unstaking doesn’t usually cause a sudden crash, but under stress it can act like a steady tap of new supply,” he explained, “pressuring prices lower if it overwhelms new demand for ETH.”
