808,880 ETH Worth $3.7B Held Up

The second most valuable cryptocurrency is seeing unprecedented wait times for both staking and unstaking, one of its most sought-after use cases.

Members of the crypto community are aghast and actively discussing the potential reasoning for this bottleneck.

A Fortnight’s Wait

Ethereum’s Validator Queue, which serves as a gauge for determining interest in staking and unstaking, has recorded an exit queue not seen before. At the time of writing, the wait time to leave, i.e., unstake, stands at a staggering 14 days, with 808,880 ETH worth about $3.7 billion, as the network’s epoch limit has been reached.

An epoch is the time it takes for validators to propose and attest to the creation of blocks, with each one averaging 6.4 minutes. Churn refers to the amount of ETH that can enter and exit per epoch, serving as a safety mechanism to prevent instability. Sweep delay, simply put, refers to the time it takes for a withdrawal to reach your wallet address after passing through the exit queue.

By contrast, the queue to start staking ETH is about half the size of the waiting list, with the current number standing at 374,136, worth approximately $1.7 billion, and with a wait time of 6 days.

CryptoPotato recently reported a similar level of exit queue activity, noting a shift in investor strategies rather than it being solely caused by profit-taking from the price action of the leading altcoin.

What Could Be Causing It?

The debate on X regarding the extraordinary wait time to unstake ETH is heated, with many investors and traders weighing in and providing their opinions on the matter.

The co-founder of the Redstone oracle service, Marcin, noted that this could have started last month, when a previous spike in exit activity was observed, with Tron’s founder, Justin Sun, withdrawing $600 million worth of ETH from the Aave protocol.

There is a popular strategy of staking ETH on Lido, the current leader in liquid staking protocols. Users would receive stETH as a result, use it on Aave to borrow more Ether, and repeat for higher yields. It’s possible that many traders have copied this and wanted to exit when they saw Sun close out his massive position.

An analyst noted that the upcoming launch of ETH staking ETFs may have caused a spike in unstaking, as investors prepared for these funds to go live following the SEC’s ruling that staking activities and liquid staking tokens are not securities.

Another key point was profit-taking, as Ethereum neared its all-time high (ATH) of $4,891.70 from 2021, prompting many traders to capitulate on the rally and take out their winnings.

The rising tide of treasury companies focusing on the altcoin with the highest market capitalization could also be contributing to this, as they seek to reinvest what they have staked so far, further exacerbating network congestion.