A sharp increase in the number of validators wishing to stake their tokens on the Ethereum network has led to the formation of an activation queue of approximately 2.5 million $ETH. Due to the current congestion, new staking participants have to wait about 43 days to activate their tokens. However, Thomas Brunner, Head of Storage and Staking at Sygnum Bank, noted that such a long wait should not be interpreted as a direct sign of a strong bull trend.
Brunner stated that while the congestion in the validator queue reflects institutional demand, it is also significantly influenced by the technical specifics of the Ethereum protocol. He noted that after the Dencun upgrade, the daily throughput for validators has been limited to about 57,600 $ETH, and that this limit has not been increased with the Pectra upgrade.
The Pectra upgrade allows individual validators to hold up to 2048 $ETH with an auto-compounding feature. Large staking operators can add $ETH to existing validators instead of creating new ones. However, even if only 1 $ETH is added to an existing validator, the transaction is included in the same activation queue as new staking participants.
Therefore, according to Brunner, not all $ETH in the queue is driven by demand from new investors. Part of the accumulation consists of the redistribution of previously staked $ETH, the topping up of existing validators, and auto-compounding processes.
Brunner noted that a stronger signal regarding the Ethereum market is the practically empty withdrawal queue. The fact that investors are not queuing up to withdraw their staked $ETH indicates that existing participants are continuing to hold their positions in the network.
Brunner said: "Virtually no one is closing their staking positions. This reflects genuine conviction. The entry queue reflects both demand and an infrastructure mechanism."
According to current data, approximately 41.2 million $ETH is staked on the Ethereum network. This corresponds to about 33.8% of the total circulating supply of Ethereum.
Brunner also noted that despite the weakening $ETH price, institutional investors have not abandoned staking. He stated that many institutions view staking yield as a natural and fundamental characteristic of Ethereum, but one of the biggest hurdles for institutional participation is privacy.
The fact that validator addresses, deposit addresses, and withdrawal transactions used in Ethereum staking can be tracked on the blockchain makes institutional investors cautious about scaling their staking operations. According to Brunner, unresolved privacy issues remain one of the main obstacles to faster growth of the institutional Ethereum staking market.
*This is not investment advice.
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