Shanghai Ethereum Upgrade Boosts Institutional Staking Investment [Advance Cash ]

Shanghai Ethereum Upgrade Boosts Institutional Staking Investment

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Early signs show that Ethereum's seamless upgrade to Shanghai has boosted institutional investor interest in staking.

Major institutional-grade ether (ETH) staking service providers have already seen inflows roughly three times larger in April compared to all of last month, said Michiel Milanovic, an analyst at blockchain development firm Ethereum. ConsenSys at CoinDesk. Some 80% of entries occurred after the Shanghai upgrade went live on April 12, he added.

Ethereum's highly anticipated technology update, often referred to as the Shanghai or Shapella upgrade, starting April 12 saw the withdrawal of some 18 million tokens, worth $35 billion, previously locked up in staking contracts. After the upgrade, the price of ETH soared to $2,100, its highest level in 11 months, defying earlier concerns that the unlock could lead to significant selling pressure and a price crash. The token recently fell below $1,900, consistent with a broader decline in the crypto market.

Allowing withdrawals also reduced the liquidity risk associated with locking ETH for staking, which previously kept some investors at bay. “We expect this to naturally increase staking rates after the initial withdrawal of ETH from long-term validators,” Milanovic said.

According to a survey by Kiln, a provider of institutional-grade staking services, 68% of investors said they intended to start staking or increase their staked amount after Shanghai. The survey was conducted in February, before the Shanghai upgrade.

Thomas de Phuoc, co-founder and COO of Kiln, said the company has seen a new wave of interest in staking, even from traditional finance companies (TradFi).

"Our sales team saw 60% more deals in the pipeline than the same time last year, including from traditional institutions," Phuoc said. "We're talking right now with some brokerage firms, investment banking holding companies in the US or Europe."

Kiln has seen $47 million (24,640 ETH) in new deposits since the Shanghai upgrade, according to a Dune dashboard by analyst at venture capital fund Dragonfly.

Rival platform saw $111 million (58,592 ETH) in inflows, more than double the $51 million (26,667 ETH) in staking rewards withdrawn, according to data from Dune.

Still, it's early to draw firm conclusions, Milanovic noted, as not all staking providers activated withdrawals immediately.