The surge in validators wanting to stake on the Ethereum network has resulted in a backlog of approximately 2.5 million ETH in the activation queue. Due to the current congestion, new staking participants are facing a wait of around 43 days to activate their tokens. However, Thomas Brunner, Head of Custody and Staking at Sygnum Bank, noted that this long wait should not be interpreted as a direct sign of strong bullish sentiment.
Brunner stated that while the congestion in the validator queue reflects institutional demand, it is also significantly affected by the technical workings of the Ethereum protocol. He noted that following the Dencun update, the daily validator login capacity was limited to approximately 57,600 ETH, and that this limit was not increased with the Pectra update.
The Pectra update allows individual validators to hold up to 2,048 ETH with the automatic compounding feature. Large staking operators can add ETH to existing validators instead of creating new ones. However, even if only 1 ETH is added to an existing validator, the transaction is included in the same activation queue as new staking participants.
Therefore, according to Brunner, not all of the ETH currently in the queue is due to new investor demand. A portion of the accumulation consists of redistribution of previously staked ETH, additions to existing validators, and compound interest processes.
Brunner said that a stronger signal regarding the Ethereum market is the nearly empty exit queue. The fact that investors are not joining the exit queue to unstake their staked ETH indicates that existing participants are continuing to hold their positions on the network.
Brunner stated, “Almost nobody is terminating their staking positions. This reflects genuine trust. The entry queue measures both demand and the infrastructure mechanism.”
According to current data, approximately 41.2 million ETH are staked on the Ethereum network. This amount corresponds to approximately 33.8% of the total circulating Ethereum supply.
Brunner also noted that despite the weakening ETH price, institutional investors have not distanced themselves from staking activities. He stated that many institutions view staking returns as a natural and fundamental characteristic of Ethereum, but one of the biggest obstacles to institutional participation is privacy.
The fact that validator addresses, deposit addresses, and withdrawal transactions used in Ethereum staking can be traced on-chain makes institutions cautious about scaling up their staking operations. According to Brunner, the unresolved privacy issues remain one of the main obstacles to faster growth in the institutional Ethereum staking market.
*This is not investment advice.
