TL;DR
- The staked ETH market has cooled off in 2024, with staking rewards declining.
- Competition for ETH staking has increased, driven by new protocols with higher yields.
- USDT experiences a devaluation following rumors of a DOJ investigation, while the correlation between BTC and ETH stabilizes.
The staked ETH market has shown a noticeable cooling throughout 2024, evidenced by the average ETH validator queue wait time, which has dropped to less than a day since August, in contrast to the 45-day wait recorded in June 2023.
This shift in staking dynamics is also due to declining rewards, which are currently lower than those offered by other major Layer 1 protocols such as Cosmos, Polkadot, and Solana, whose yields range from 7% to 21%.
Despite this decline, Ethereum staking yields continue to be a benchmark in decentralized finance (DeFi), playing a similar role to the federal funds rate in traditional finance.
The information analyzed comes from a report by the Kaiko research team, which highlights how growth in the participation of Lido, the largest provider of staked ETH, has reached a plateau point.
The stETH supply has remained relatively constant, averaging 9.6 million ETH, reflecting slower accumulation in the Beacon Chain contract.
However, growth in total ETH deposited has increased by approximately 5.7 million ETH this year, a notably lower figure compared to the previous year.
Competition in the staking sector has increased as new protocols such as Spark and Morpho have emerged offering higher yields.
This has led to a decline in the share of stETH on platforms like Aave, which has fallen from 20% to 13% of the total stETH supply on Ethereum, demonstrating the increasing diversity in the use of assets as collateral.
This competition is not only benefiting investors, but also fostering a more robust staking ecosystem, decreasing the dependence on individual players.
New dynamics in the market
The recent devaluation of USDT to $0.994 on US exchanges, fueled by rumors of a Department of Justice investigation into Tether, has created panic in the market.
Despite this, USDT’s share of stablecoin trading volume remains at 75%, indicating its prevalence despite the growing preference for regulated options like USDC.
Furthermore, the correlation between BTC and ETH has shown signs of recovery, suggesting that ETH continues to offer similar diversification benefits to BTC, despite its underperformance since the transition to proof-of-stake.
With the DeFi landscape constantly evolving, the decentralized lending and borrowing space has seen an increase in competition, exemplified by the conflict between Aave and Morpho.
Morpho has sought to improve the efficiency of matching between lenders and borrowers, but this has created tensions within the DeFi community.
As protocols struggle to retain their users, it is clear that the ecosystem is in a transformational phase, where innovation and competition will set the tone for the future of Ethereum and its staking.