Binance and Coinbase lose $700 million in Ether as liquid staking gains traction
Blockchain data indicates that following Ethereum’s Shanghai upgrade, the two largest centralized cryptocurrency exchanges, Binance and Coinbase, have experienced considerable outflows of staked ether (ETH).
A Dune Analytics data dashboard shows that since April 12, there has been a $367 million net outflow of staked ether from Coinbase’s staking platform as a result of reward withdrawals and full exits outpacing fresh inputs. The biggest cryptocurrency exchange in the world, Binance, has experienced a net outflow of $340 million from its staking service.
The amount of Ether invested in decentralized protocols is growing
On April 12, investors were able to withdraw about $35 billion in Ether that they had previously held in staking contracts following Ethereum’s much-awaited Shanghai upgrade. Analysts projected that the event will be a watershed moment for the $225 billion network, raising staking participation, luring institutional investors, and reshuffling staking service rivalry.
According to sources, Ether deposits in decentralized protocols have surged dramatically. With net infusions of $56 million and $68 million, respectively, Frax Finance and Rocket Pool were the two biggest beneficiaries.
According to sources, the improvement was “a major catalyst” for decentralized liquid staking systems. Liquid staking protocols generate a derivative token that indicates the quantity of sealed tokens and allows investors to use DeFi services like lending and borrowing.
According to DefiLlama data, the amount of ETH wagered on Frax and Rocket Pool has climbed by 32.5% and 31.0%, respectively, over the last 30 days due to fresh deposits.
With almost $11 billion in deposits, Lido Finance is the largest decentralized liquid staking mechanism. Since April 12, there have been about $28 million more inflows than withdrawals.
Investors on centralized exchanges are uneasy due to regulatory worries
According to 21Shares analyst Tom Wan, regulatory concerns and resistance to centralized crypto platforms following last year’s bankruptcy are likely factors driving investors to decentralized staking systems.
After being charged by the Securities and Exchange Commission (SEC) for providing unregistered securities, Kraken agreed to suspend its staking business in February 2018. Following the settlement, the price of liquid staking tokens rose as the SEC appeared to be targeting staking service providers who benefited from decentralized liquid staking.
According to reports, regulatory pressure on centralized entities may persist. The higher staking payouts that decentralized protocols might offer may also sway investors. Coinbase and Binance currently give a yearly payout of about 4% for ETH staking, whereas decentralized protocols Lido Finance and Frax Finance offer 5-7%.
Despite being two of the biggest and most well-known exchanges in the market, Binance and Coinbase remain vulnerable to regulatory changes, which emphasizes the need for innovation in the cryptocurrency business.
As governments throughout the world wrestle with digital asset legislation, it is evident that the decentralized nature of blockchain technology brings both potential and challenges. While decentralized exchanges provide users with greater autonomy and privacy, they also lack the protections provided by centralized entities.
Despite recent outflows, Binance and Coinbase are still among the biggest ETH staking providers. But compared to a month ago, Binance’s market share dropped from 5.7% to 4.5%, and Coinbase’s share dropped from 13% to 12.3%.
According to Nansen, a blockchain intelligence business, the two exchanges are expected to see more outflows. While Binance has $41 million in pending withdrawal requests, Coinbase has about $191 million in staked ETH that is awaiting extraction.
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