Ethereum’s validator exit queue swelled on Tuesday to its longest wait time in more than a year, that could signal a rush among stakers to pull funds after a major price rally in ether (ETH).
There was nearly 519,000 ETH as of Tuesday U.S. afternoon, worth $1.92 billion at current prices, in line to exit the network, data by validatorqueue.com shows.
That the largest amount in the exit queue since January 2024, extending withdrawal delays to over 9 days, per the data source.
The congestion is due to the dynamics of Ethereum’s proof-of-stake model, which limits how quickly validators can join or leave the network. Validators are entities that stake tokens to help secure the blockchain in return for a reward.
Profit-taking after ETH rally
The ongoing exodus is likely due to profit-taking by those who staked ETH at much lower prices and now cashing out after ETH rallied 160% from the early April trough.
«When prices go up, people unstake and sell to lock in profits,» said Andy Cronk, co-founder of staking service provider Figment. «We’ve seen this pattern for retail and institutional levels through many cycles.» He also added unstaking spikes could also happen when large institutions move custodians or change their wallet tech.
Notably, there was a surge of validators entering the network during March and early April, a period when ETH traded between $1,500 and $2,000.
David Shuttleworth, partner at Anagram, said that behind this dynamic could be «a mix of older stakers capturing profit as well as stakers shifting to a treasury strategy.»
Ether-focused treasury vehicles such as SharpLink Gaming (SBET) and Bitmine (BMNR), which have recently captivated Wall Street, have been busy gobbling up ETH over the past few weeks. Some of those firms also accepted in-kind contributions in their fundraising, which might have prompted institutional token holders to unstake and contribute, noted Matthew Sheffield, head of spot trading at prime broker FalconX.
«Over the past few weeks, we’ve seen multiple ETH-focused vehicles active in the market, with more likely to raise capital in the coming weeks,» Sheffield told CoinDesk. «The increase in the queue to unstake could, in part, reflect investors looking to contribute in-kind to those deals.»
ETH staking demand also soars
Despite the wave of tokens being unstaked, a large sell pressure may not materialize as there’s a consistent demand to stake tokens and activate new validators.
There’s over 357,000 ETH, worth $1.3 billion, waiting to enter the network, stretching the entry queue beyond six days, its longest since April 2024.
Some of this fresh demand may have come from the ETH treasury firms. For example, Sharplink Gaming accummulated over $1.3 billion in ETH since its pivot in late May and staked tokens as part of its strategy to earn rewards.
Also, the Securities and Exchange Commission (SEC) clarified on May 29 that staking does not violate U.S. securities laws, which bolstered institutional appetite.
Underscoring the trend, the number of active validators grew 54,000 since late May to reach a record high of nearly 1.1 million, per validatorqueue.com.
«Since the SEC provided guidance on staking in May, Figment has seen a more than 100% increase in Ethereum staking delegations from institutions and a more than 360%+ increase in Ethereum queue times, which is inline with the price increases we’ve seen in ETH,» Cronk told CoinDesk.
Read more: Institutions Are Driving Ethereum’s ‘Comeback’
UPDATE (July 23, 22:10 UTC): Added comment from Matthew Sheffield, head of spot trading at FalconX.