Recently, the market for cryptocurrencies has undergone significant changes, and some analysts believe that the recent opening of staking functionality for Ethereum (ETH) may be one of the contributing factors to this market decline.
A second wave of full withdrawals from staking is currently underway, and a significant cryptocurrency exchange called Kraken is at the forefront of this development. Kraken has processed over 330K ETH in full withdrawals, and around 175K ETH is still available, most of which are principal withdrawals. While it is important to emphasize that the exchange itself was not directly responsible for the market decline, it is important to note that the withdrawal of Ethereum staked from it contributed to the market decline.
A possible explanation for the market rally that occurred a week ago in response to the news that Ethereum staking is about to open is that withdrawals from staking contracts are taking longer than expected to process. This lag occurs because there is a limit to the amount of ETH that can be released in each block.
As a result, there is a lag in the ETH effect in the market as it is gradually withdrawn and sold. An increase in the amount of staked ETH that is opened and withdrawn causes an increase in the amount of selling pressure on the market, which in turn causes the price to fall.
The release of Ethereum that had been staked had resulted in a flood of withdrawals, which caused significant selling pressure and contributed to the market’s decline. At the time of publication, the price of the second most valuable cryptocurrency on the market was $1,918.
It is possible that staking unlock Ethereum will not have a negative impact on the market which will survive in the long term. It is possible for the market to recover and resume its advance once the selling pressure subsides and the drawdown continues as planned. Also, as investors will have full control over the funds locked in the contract, it is possible that more investors will start staking their ETH.