More Ethereum (ETH) unstaked amid price weakness, Ethereum Foundation leadership controversy

Ethereum (ETH) is going through another drawdown of staked tokens. This time, the withdrawals are not so sharp, but they have been going on for months. 

More Ethereum (ETH) is getting unstaked in the past months, coinciding with a leadership controversy surrounding the Ethereum Foundation. The recent outflows totaled over 788K ETH, more than a year’s supply of new tokens. 

Since November 7, 2.3% of all staked ETH has been sent back to circulation. Still, over 28% of the supply of ETH has been staked, most often through LidoDAO. 

The withdrawals add to the loss of confidence in Ethereum’s long-term governance. After recent controversy about selling ETH and the launch of a second Ethereum Foundation, the chain is now starting to lose its biggest claim to primacy, the large-scale value locked. 

The withdrawals also follow a decrease in the ETH reward to 2.19% annualized after holding for one year.

At the same time, holding ETH comes with the risk of negative price action. Most ETH staked is based on legacy inflows at a lower price range under $2,000. However, the past year saw inflows of ETH at a higher price. 

Deposits into Beacon Chain are still happening, though inflows slowed down since August 2024. There are also more days with complete withdrawals of stakes from the Beacon Chain contract. 

Ethereum’s chain has selected the metric of ‘economic security’ as its leading indicator of success. A 32-ETH stake is valued at over $125K, a significant barrier against rogue validators and network attacks. After the initial rapid expansion, the chain also carries more than 1M validators. 

Ethereum still has $64.37B in total value locked. However, the metric of economic security does not match recent economic activity. In the first month of 2025, Ethereum lagged behind Solana in terms of fee generation.

Additionally, the value of SOL staked is almost catching up with the ETH held in the beacon chain. The mix of security and recent economic value shows Solana may finally start to displace Ethereum as the go-to chain for fast tokenization.

In January, Ethereum produced $122.9M in fees, surpassed by Solana with $167M in fees, based on Token Terminal data.

Withdrawals affect Coinbase staking mechanism

One of the sources of staking outflows was the Coinbase staking program. While more ETH flowed through Binance staking, Coinbase saw peak outflows. 

Coinbase is the third-largest entity, with over 3.4M ETH staked, valued at over $10B. The centralized exchange is the leader among other market operators, drawing in more than 38% of user deposits. 

In the past month, Coinbase saw more than 331K ETH withdrawn from staking, showing the shift of interest toward Solana. 

LidoDAO saw the second-biggest outflows, with more than 124K ETH unstaked. A small part of the ETH flowed back into Ether.Fi, Kiln, and Galaxy Digital. LidoDAO is still the biggest liquid staking entity, carrying 89% of ETH for this category of staking, leaving the rest to its smaller competitors. 

Can ETH still recover? 

Ethereum relies on its legacy status, to be used for asset tokenization and institutional chains. Recently, Ethereum became the carrier for Soneium, a new L2 chains of the Sony Corporation. Currently, the Ethereum Foundation is seeking a convincing narrative for holding ETH, as it has found no other use case for the token than liquidating for current expenses. 

Despite the growth of L2, ETH still cannot break into a higher price range, hovering at $3,100 even as BTC and other assets post new price records. 

ETH traded at $3,228.86 after another week of downward price pressure, extending its long trend of losing against BTC. ETH kept sinking as Ethereum supporters switched their avatars to Miladies and tried to move between the ‘ultrasound money’ narrative and being a platform for computation. 

Crowd money is currently neutral on ETH, while smart money is slightly bearish. Ethereum sales also accelerated in January, with pressure from whales and a lower number of buyers. 

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