Top Ethereum Withdrawals
A total of 1M $ETH has been withdrawn since the Shanghai Upgrade went live, representing a $2.2B outflow. Additionally, another 900k $ETH is in the exit queue waiting to be fully withdrawn. Here is an overview of the situation:
For context, here are the key metrics since April 12th:
- Full Withdrawals: 212k, or -$442M
- Partial Withdrawals: 842k, or -$1.75B
- Deposits: 435k, or $907M
- Net: 619k, or -$1.29B
- Full Withdrawals waiting in the queue: 916k or $1.9B
Before we dive into the reasons behind the withdrawals, let's briefly explain the difference between partial and full withdrawals.
Partial Withdrawals: Only staking rewards; automatic for validators that have their 0x01 withdrawal credentials updated
Full Withdrawals: Unstaking all ETH and leaving the staking contract; there is an exit queue that supports a maximum of 1800 validators per day (57.6k $ETH)
In first place comes Lido with 260k $ETH, the largest entity by ETH Withdrawn. All of this, however, comes from staking rewards, as full withdrawals will only be enabled after the v2 upgrade next month.
It is worth pointing out that this outstanding supply won't necessarily become sell pressure. As evidenced by on-chain activity, a usual portion of that is restaked to compound back the rewards, either through Lido itself or other staking alternatives
Next comes Kraken in second place, with 205k $ETH withdrawn and another 400k in the exit queue, most of it being full withdrawals.
Kraken's large withdrawals can be explained due to regulatory crackdowns, as it was forced to shut down its staking services in the U.S. after a settlement with the SEC.
Binance comes in third place with 86k withdrawn and another 192k in the exit queue. We believe the main reason behind this activity is in anticipation of the BE 0.00%↑ TH redemptions that will start on 04/19.
In fourth spot, there's Coinbase with 123k $ETH in the exit queue . The main reason behind their withdrawal activity is highly likely due to the $cbETH arbitrage.
As $cbETH trades at a discount relative to its redemption price on decentralized exchanges, such as Uniswap V3, traders are incentivized to arbitrage by buying it, depositing on Coinbase, and then redeeming for ETH, which should trigger large withdrawals.
This led to a 4% $cbETH redemption during the first three days after Shanghai, with 45k redeemed and a short spike in its price. This strategy's downside is that traders must wait until withdrawals are fully processed for the redemptions to occur, which could take weeks.
In the 5th spot comes HuobiGlobal with 51k in rewards withdrawn. It is rumored that the reason behind it is mainly due to its recent changes in the shareholders’ board, but they've started redepositing it back from another wallet with 5.5k.
It is also important to point out that one other possible reason behind CEX's withdrawals may be attributed to a restaking behavior from market participants.
Now that withdrawals are enabled, they can opt for the best option, which in most cases converges to decentralized alternatives with higher yields, lower fees, and composability within the DeFi space.
As the demand for LSDs increases, it could lead to a growth in their market share compared to relative to centralized solutions, so it is an important metric to monitor going forward, as it provides valuable insights around the staking landscape.
Lastly, it is also worth noting that Lido and Rocket Pool, large entities that sum up for 33% of all staked $ETH deposits, haven't enabled withdrawals. Lido is expected to do so in May with its v2 upgrade, while Rocket Pool will do it on April 18th with the Atlas Upgrade.