According to blockchain analytics firm Glassnode, Ethereum’s staking deposits have recently experienced a downturn, which can be attributed to two key factors. The first is an increase in regulatory pressures, while the second is the technical challenges brought by the Shapella upgrade.
About the Decline
According to a recent report by Glassnode, there has been a significant decrease in the total amount of Ethereum that has been deposited in the Beacon Chain’s staking contract. The report states that the amount has reduced from 6.9 million to 6.7 million ETH in the past week, which is a noteworthy decline.
This is particularly concerning given that Ethereum staking is a critical aspect of the network’s transition to a proof-of-stake consensus algorithm. Investors who were anticipating reaping the benefits of the staking process and earning rewards on their deposits are undoubtedly disheartened by this news.
Worldwide Regulatory Pressure
Governments worldwide are increasingly concerned about the potential use of cryptocurrencies in illicit activities such as terrorism financing and money laundering. Consequently, stricter regulations are being imposed on cryptocurrency exchanges and related services.This has resulted in a reduction in demand for ETH, as investors are understandably hesitant to purchase the cryptocurrency due to regulatory uncertainties.
Furthermore, some investors are withdrawing their staking deposits out of fear that their funds may be confiscated by authorities.
About the Shapella Upgrade
The recent Shapella upgrade of the Ethereum network has been identified as a contributing factor to the decline in staking deposits. This upgrade has brought about changes in the process of Ethereum transactions, resulting in increased fees for users. Consequently, staking has become less profitable for investors as they need to pay higher transaction fees to earn rewards on their deposits.
This recent development could have potentially dissuaded certain investors from investing their ETH, while some might have even withdrawn their deposits.