Ethereum: Is this the right time to stake ETH?

• Ethereum PoS staking surged since the Shanghai Upgrade and the Merge.
• Stakers have had mildly realized losses in the last 365 days, but there could be a chance to stake more.

The number of Ethereum [ETH] staked reached 26.5 million on 6 September, according to Chain Afrik. Chain Afrik, which is an African-based blockchain community, coined the data from IntoTheBlock.

Realistic or not, here’s ETH’s market cap in BTC terms

This amount of ETH staked implied that the blockchain saw an increase in staking activity. One reason behind this was the Shapella upgrade, which was activated on 12 April.

Billions and counting 

ETH staking began in December 2020, through which participants could validate transactions and earn rewards for their contribution. As of March 2023, over $28 billion worth of the altcoin has been staked. 

However, most of the staked ETH were locked until the Shapella upgrade provided the avenue to unstake and stake at any given time. 

While the Shapella upgrade may have offered withdrawals, the main rationale for the hike is largely the Merge. The Ethereum Merge occurred in 2022 when the blockchain transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

Although not every section of the Ethereum community felt the decision was great, the rise in ETH staked seemed to have proved that notion wrong. As such, the Ethereum PoS future could be greater than it was when it operated on the PoW like Bitcoin [BTC].

Since the PoS transition laid the foundation for staking assets, the number of validators has crossed the 800,000-mark.

Source: Dune Analytics

Downsides and an opportunity

With a netflow of 6.92 million ETH since Shanghai, liquid staking activity has also increased. According to Dune Analytics, Lido Finance [LDO] boasted a 32.42% market share in the sector at press time. 

Other projects including Rocket Pool [RPL], Binance [BNB], and Coinbase [COIN] also increased their participation. At the time of writing, Binance’s market share was 4.50% while Coinbase stood at 8.59%.

Source: Dune Analytics

But how profitable has ETH staking been, and is this a good time to jump into the staking game? Well, two metrics could answer this question. First is the ETH stakers’ realized value. The second metric to consider is the ETH stakers’ Market Value to Realized Value (MVRV).

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The ETH stakers’ realized value captures the average price at which the entire ETH staking supply moved on-chain. At the time of writing, the metric had increased to 27.51 billion. This means that there is a large difference between the realized price for deposits and the spot price.

Source: Glassnode

Additionally, ETH stakers’ 365-day MVRV was down to -9.76%. The decrease in this metric implies more of a realized loss for validators. However, it also seems to present an opportunity to increase deposits in case ETH’s value rallies in the future.