Recently, the market for cryptocurrencies has been subject to significant swings, and some analysts believe that the recent unlocking of the staking function for Ethereum (ETH) may be one of the factors contributing to this market decline.
The second wave of full withdrawals from staking is currently taking place, and a significant cryptocurrency exchange called Kraken is at the forefront of this development. Kraken has processed more than 330 thousand ETH in full withdrawals, and approximately 175 thousand ETH are still available, most of which are principal withdrawals. Even though it is essential to emphasize that the exchange itself is not directly responsible for the market’s decline, it is important to note that the withdrawals of staked Ethereum from it contribute to the market’s downward trajectory.
A possible explanation for the market rally that took place a week ago in response to the news that Ethereum staking would be unlocked is that withdrawals from staking contracts take longer than expected to be processed. This lag occurs because there is a cap on the amount of ETH that can be unstaked in each block.
As a result, there is a lag in the effect that the ETH has on the market as it is gradually withdrawn and sold. The increase in the amount of staked ETH that is unlocked and withdrawn leads to an increase in the amount of selling pressure on the market, which in turn causes prices to decrease.
The release of Ethereum that had been staked has resulted in a flood of withdrawals, which has led to a significant amount of selling pressure and contributed to the market decline. At the time of publication, the price of the second most valuable cryptocurrency on the market was $1,918.
There is a possibility that the Ethereum staking unlock will not have a negative effect on the market that will persist over the long term. It is possible for the market to recover and resume its ascent once the selling pressure has subsided and the staking withdrawals have continued as planned. In addition, because investors will have complete control over the funds that are locked in contracts, it is possible that more investors will start staking their ETH.