Ethereum Staking Hits 29% of Supply Amid 38% Price Decline

Ethereum Staking Surpasses 29% of Total Supply Amid Price Decline

Ethereum staking contracts have now locked up nearly one-third of all Ether in circulation, reaching a new milestone of 29% of the total ETH supply. This substantial reduction in available tokens has created a notable supply shock, tightening liquidity across exchanges. The development coincides with Ethereum’s price remaining approximately 38% below its all-time high recorded in November 2021, highlighting a complex and evolving market landscape.

Recent blockchain data reveals that over 121 million ETH are currently staked, significantly diminishing the circulating supply. On average, more than 140,000 ETH—valued at around $393 million—are withdrawn daily from exchanges, further constraining liquidity. This trend is driven in part by large holders and institutional investors who continue to accumulate ETH off-exchange, intensifying the supply squeeze.

Market Dynamics and Trading Strategies Amid Supply Constraints

Market responses to these shifts have been mixed. Some analysts interpret the surge in staking as a sign of growing confidence in Ethereum’s long-term fundamentals. Conversely, others point to recent large-scale transfers, including a $237 million ETH inflow to exchanges by whale investors, as a potential catalyst for the recent price decline. The broader cryptocurrency market has also experienced downturns in assets such as XRP and Dogecoin, although comments from Federal Reserve Governor Christopher Waller regarding possible interest rate cuts have injected a degree of optimism for Ethereum and other altcoins.

The current environment is characterized by elevated leveraged short positions, with hedge funds employing basis trades that exploit price differentials between CME futures and the spot market. These strategies involve shorting futures contracts while holding long positions in spot ETH to capture staking rewards, which currently yield approximately 13% annually. As a result, leveraged short positions have surged to a record -13,291 contracts, marking the steepest decline since early 2025. This confluence of factors, combined with shrinking exchange liquidity, raises the prospect of a short squeeze should prices begin to rise sharply, potentially forcing short sellers to cover their positions and triggering a price rally.

Looking forward, the anticipated approval of Ethereum staking exchange-traded funds (ETFs) by the end of the year could further exacerbate the supply shock by channeling additional capital into staking and tightening liquidity. Some market observers suggest that these developments, alongside robust staking rewards and persistent supply constraints, could drive Ethereum toward new price highs, with targets as ambitious as $10,000 being discussed. However, the basis trade strategy carries inherent risks; increased market volatility could undermine investor confidence and precipitate sharp corrections reminiscent of the 2020 Black Thursday crash.

Ethereum’s open interest and inflows are also attracting attention, with some analysts drawing parallels to Bitcoin’s previous bull cycles and speculating on a potential breakout. As staking continues to dominate, the balance between supply and demand is shifting, with stakers effectively acting as a significant sink for circulating ETH. Should demand remain steady or increase, these dynamics may support a bullish trajectory for Ethereum.

The market remains highly sensitive and reactive, with significant price movements possible as the effects of the ongoing supply shock continue to unfold.