The queue for activating Ethereum validators is experiencing a significant uptick, reaching one-year highs not seen since 2024’s Dencun upgrade piqued adoption with increased network capacity and lower transaction fees.
While Ethereum’s network upgrades have traditionally been the trigger for such spikes in inbound staking demand, this time, something new is driving ETH staking adoption — institutions.
Inbound institutional demand for ETH staking is driving a new peak in adoption, with Ethereum’s validator entry queue reaching one-year highs. Image Source
The ETH validator entry queue has remained consistently within the range of 300k-350k inbound ETH since the start of June, the equivalent of $826M-$964M in simultaneous inbound demand. At the same time, spot ETH ETFs have seen $699M in net inflows over the last 30d, outperforming other crypto ETF markets.
This trend is not coincidental, but influenced by a convergence of regulatory shifts, protocol upgrades, and increasing market pressure.
The Factors Driving Today’s ETH Staking Demand
- Regulatory Clarity: The U.S. Opens the door
The inbound institutional demand for ETH staking reached new highs following the SEC’s statement on protocol staking activities on May 29, which provided long-awaited clarity that certain ‘staking’ activities are not securities transactions within the scope of the federal securities laws.
As Figment’s Institutional Business Development Lead Josh Deems explained in his coverage, “For institutional investors, including ETFs and other institutional investors that have been evaluating staking, this is the clearest green light yet.”
This momentum continued to grow with a stream of increasingly-positive signals toward staking from U.S. regulators. SEC Chairman Paul Atkins’ remarks in a June 9th roundtable further reinforced the position that self-custodial staking with a third party operator (such as Figment) shouldn’t be limited, stating that the “right to have self-custody of one’s private property is a foundational American value,” specifically surrounding staking and other onchain activities.
Beyond these comments, full regulatory clarity and lawmaking surrounding staking is still needed. The U.S. is not yet fully ‘open for business’ when it comes to staking, as the recent guidance on staking is non-binding. But these positive comments represent a marked change from the government’s position toward staking over the last 4 years, signalling that one of the last major impediments to widespread staking adoption is in the process of being removed.
Following her June meetings with U.S. policymakers in D.C., Eme Housser, Figment’s Director of Legal and Regulatory Affairs, explained that the less-covered market structure bill that was advanced on May 29, the Digital Asset Clarity Act, may provide the statutory certainty that specific crypto asset staking activities for proof-of-stake (PoS) networks do not create investment contracts that would require registration under the federal securities laws. “This timing wasn’t coincidental and signals coordinated movement across both regulatory and legislative channels,” Housser wrote. The bill already passed the House Financial Services Committee by a bipartisan vote and the House Agriculture Committee on January 13. If passed by both full chambers next, it will be sent to the President for signature in the upcoming weeks.
Figment is already experiencing significant institutional activity and facilitating discussions on accelerating staking strategies in anticipation of regulatory clarity.
- Institutional Pressure: Demand for ETF Staking
When it comes to competition, demand for staking in ETH ETFs leads the way in the recent staking uptick. The ETH staking entry queue’s growth first started to pick up around May 21, following reporting that the SEC was making positive movement toward the approval of staking in spot ETH ETFs.
It’s widely accepted that spot ETH ETFs in the U.S. won’t sit idle once staking is approved. While competition across spot ETH ETFs in the U.S., much like Bitcoin ETFs, has mostly represented a race-to-the-bottom in pricing to attract clients, the opportunity to integrate Ethereum’s native reward rate to the funds’ NAV has been widely-cited as a missing feature that’s expected to drive inflows.
This development could, in turn, push other investment vehicles that include Ether to integrate staking, too, in order to remain competitive. Any long-only ETH investment vehicle that forgoes staking risks underperforming against its peers, a powerful motivator in both the TradFi and the crypto-native spaces.
- Ethereum’s Pectra Upgrade: Institutional Control
With each successful hardfork Ethereum continues to build on its success, achieving roadmap milestones and growing positive institutional sentiment. . The Pectra network upgrade in May introduced significant improvements to make institutional-scale staking on the network more efficient and secure.
Changes like raising the maximum effective validator balance from 32 to 2048 ETH, alongside execution layer-triggered consolidations, partial withdrawals, and exits, together improve liquidity, flexibility, reward efficiency, and operational risk management for validators.
For institutional stakers the changes also critically improve security and control, allowing exits from the execution layer if an operator were to become non-responsive, allowing them to optimize rewards, manage liquidity more efficiently, and to (potentially) optimize tax implications.
Together, these updates provide additional peace-of-mind that Ethereum’s staking infrastructure more fully supports enterprise adoption.
- The Queue Is Back, and Matters More Than Ever
Ethereum may be facing increased competition across the digital asset ecosystem, but it still leads the pack — outpacing the rest of the Proof-of-Stake landscape across metrics from value secured, economic security, and user count, to application development and diversity, builder ecosystem, and scope of technical improvements.
Currently, only about 30% of ETH is staked, a figure that stands in contrast to other networks like Solana, where participation exceeds 70%. As Ethereum approaches its 10th anniversary this July, its strong reputation and position as the primary entry point for institutional staking is stronger than ever. Paired with positive regulatory developments, technical improvements, and an ETF market, staking participation on Ethereum is likely to continue to rise in the months to come.
With a maximum of 57,600 ETH eligible for activation per day, growing demand can lead to significant delays and, consequently, lost opportunity to receive rewards. Post-ETF approval in July 2024, the ETH staking queue hit a one-year high. Can we reach 46% of ETH staked (~55M ETH) in 12 months? Time will tell, but the validators who are already queued will certainly be ahead if it happens.
Ahead of the Curve: Preparing a Staking Strategy
As institutions evaluate their ETH strategy, the growing activation queue represents a visible signal of a shifting landscape. The rules are changing, The window of opportunity to get ahead of competition with a robust staking strategy is opening.
Early movers benefit from getting ahead, including:
- Better validator activation timing
- Higher staking rewards in the near term
- Lower queue-related friction
The Figment team is happy to share our latest Ethereum research to help your institution and take advantage of the dynamics we are seeing real-time.
