Download App
iOS & Android

Twists and Turns

Repost from Glassnode, Alice Kohn: “Twists and Turns” The full report and all related findings are available on the official website of Glassnode.

The growth rate of the Ethereum validator set has slowed in recent weeks, as an increasing number of validators voluntarily exit. This has slowed the rate of ETH issuance. Alongside increasing ETH burnt via EIP1559 due to growing network activity, the ETH supply has turned deflationary once again.

Executive Summary

  • The Ethereum staking pool has experienced a significant trend change marked by an increasing amount of validators exiting since October. This development correlates with a broader bullish uptrend across digital asset markets.
  • The increased number of validator exits has contributed to a decline in daily ETH issuance, which is related to the amount of active ETH within the staking pool.
  • Simultaneously, we have seen increased network activity, driven by renewed interest in tokens and stablecoins. This is reflected by an increase in gas fees being burnt via EIP1559 triggering a deflationary turn the ETH supply.

Undoubtedly, the most significant headline of the past week was the resignation of Binance CEO CZ. The settlement amount reached with the authorities stands at $4.3 billion, with many seeing this pivotal event as a marker for the end of the 'wild-west' years of the digital asset industry.

Following this announcement, the price of BNB experienced a -9.1% decline. However, this market reaction is relatively moderate when compared to previous price drops, such as the -24% fall when the SEC announced charges earlier in the year.

Live Chart

Following this news, the Binance exchange experienced an uptick in withdrawal activity across major assets. The aggregate balance of a range of DeFi 'blue-chips' decreased by -6.7% within the first 24 hours, while BTC, ETH and Stablecoin balances declined by -4.4%, -4.9% and -2.2%, respectively.

However, in the six days following CZ's resignation, these exchange balances saw a recovery, with all four token categories seeing a slowdown of outflows, and indeed a return to net inflows. In many ways this demonstrates a level of trust users have in the Binance platform. It could also be argued that confidence may even improve given the settlement requirement for US regulator oversight over the next three years.

Live Chart

Validator Exits

While not capturing the same headlines as the Binance settlement, the Ethereum staking pool has has experienced a notable shift since the start of October. An increasing number of validators are currently exiting the staking pool.

Shanghai enabled stake withdrawals, and was followed by a surge in validators exiting, claiming rewards, and reshuffling their staking provider and setup. Exiting events averaged 309 validators per day during this time.

Since early October, we have seen a gradual increase in exiting events, reaching an average of 1018 validators per day. This uptick aligns with the recent uptrend in spot prices across digital asset markets.

Live Workbench Chart

Consequently, the Total Effective Balance, representing the ETH in the Staking Pool, that is actively participating in Proof-of-Stake Consensus, has slowed in its growth and is now experiencing the first decline since the Shanghai upgrade.

The gradient of the Total Effective Balance began to flatten out in mid-October, registering an average increase of 0.1% to 1% per day, more than halving the growth rate sustained since May.

Live Chart

Upon closer examination of exiting validators, we can see it is largely driven by voluntary exits over the past eight weeks. Voluntary exits refer to stakers who independently choose to exit the staking pool. This is distinct from slashing, which is a penalty applied to validators which violate protocol rules.

In the same timeframe, only two slashing events have occurred, one of which was substantial, involving 100 newly-entered validators, slashed for simultaneously signing two different blocks of the network.

📊Related Dashboard: We deep dive into the ETH Staking Dynamics in our dashboard ETH Proof-of-Stake Consensus.

Live Workbench Chart

Exiting validators can be further categorized by the staker type they belong to. This reveals a few interesting trends:

  • Centralized exchanges (CEXs) have consistently dominated stake withdrawal events since October, with Kraken and Coinbase seeing the largest outflows.
  • Liquid Staking Providers have also experienced a modest uptick in withdrawn stake as well, with Lido remaining the largest player in the space.

There are a few points which may be driving this investor behavior:

  1. Investors opting to change their staking setup, for example transferring stake from CEXs to Liquid Staking Providers (perhaps due to ongoing regulatory concerns).
  2. Investors with access to US capital markets may be rotating capital towards safer assets such as US treasuries as interest rates remain elevated relative to ETH staking returns.
  3. Investors may also be seeking greater liquidity for held ETH in anticipation of an imminent market uptrend, rather than less liquid staked ETH.Kraken and Coinbase stand out as top providers seeing withdrawals, while Lido leads in exits among Liquid Staking Providers. However, these same entities, with Lido taking the lead, are also the primary recipients of stake deposits, showing a net stickiness and dominance of these large pools of capital.

Live Chart

On a net change basis, Lido continues to grow in dominance, increasing its aggregate staked balance by 468k ETH. Across CEXs, Coinbase and Binance have seen a net increase in their staking balances, whilst Kraken has reduced its stake balance by -19.4k ETH. Among staking providers, HTX and exhibit the most significant reduction in their staking balances, each decreasing by over ETH -44k.

Live Chart

Aligned with the observed reduction in Effective Balance, there has been a corresponding decrease in ETH issuance. The daily issuance of ETH to validators is contingent on the number of Active Validators, or respectively, the Total Effective Balance within the staking pool.

As the growth rate of validators slows and declines, the daily ETH issuance has experienced a corresponding slowdown. Over the last 7-days, the growth rate of ETH issuance has slowed by up to 0.5% per day. Notably, the rate of issuance has decreased for the first time in recent days.

Live Chart

As issuance rates experience a decline, we now turn our attention to the complementary aspect of the equation—the burn rate. Initiated with the London hardfork in 2021, the fee-burning mechanism of EIP1559 involves the burning of a portion of transaction fees, setting the stage for the ETH supply to become deflationary with elevated network usage.

In tandem with rising gas prices, which signify growing transaction demand on the Ethereum network, the daily amount of ETH fees burned has increased as well. In October, we see the amount of ETH fees being burnt reaching 899 ETH per day. Fast forward almost one month, and the accumulated fees burnt has now reached 5,368 ETH.

📊Related Dashboard: We deep dive into the complex ETH Supply Dynamice in our dashboard ETH Supply and Issuance.

Live Chart

We can also assess a detailed breakdown of gas usage across various transaction types. These metrics enable us to identify activities that predominantly contribute to the supply burn.

Upon examining the two sectors that historically fuelled Ethereum network adoption, it becomes evident that both NFT transactions and DeFi transactions are contributing relatively little over the past four months, with decreases of -3% and -57%, respectively. Both sectors have seen declining adoption and are contributing little to the latest surge in activity on-chain.

Live Chart

The recent surge in network activities is primarily attributed to token transfers and stablecoins. Gas usage for tokens has risen by +8.2% over the last three months, whilst stablecoin gas usage has increased by +19%. This suggests a potential light capital rotation is taking place towards longer-tail assets as confidence in market strength increases.

Live Chart

Since the London hardfork, the ETH transitioned from net inflationary towards a state of equilibrium and outright or deflation. The network experienced a brief period of net inflation between August and October as a result of lower network activity.

In recent weeks, as a result of both declining issuance rates, and larger volumes of supply burnt, the aggregate ETH supply has turned net deflationary once again.

Live Workbench Chart

Summary and Conclusions

Recent weeks have seen a notable shift in the Ethereum staking pool dynamics, as the number of validators exiting the pool starts to increase. This has resulted in a slowdown of the growth rate for ETH issuance, and the first reducion in the staking pool balance since the Shanghai upgrade.

Furthermore, a recent surge in network activities, particularly driven by token transfers and stablecoins, has led to elevated transaction demand. This has in turn put upwards pressure on gas prices, creating an increase in daily ETH fees burned via EIP1559.

These two forces in combination have resulted in the global ETH supply turning deflationary once again. In this context, the interplay of these factors underscores the dynamic nature of the Ethereum network, supply and its responsiveness to trends in market activity and adoption.


All Comments

Recommended for you

  • BuildBear Labs Raises $1.9M to Accelerate Development of Web3 Tools for Secure dApp Creation

    Singapore-based BuildBear Labs has secured $1.9m in funding from investors including Superscrypt, Tribe Capital, and 1kx, as well as angel investors such as Kris Kaczor and Ken Fromm. The funds will be used to speed up development of the company's flagship platform, which provides developers with testing and validation solutions for secure decentralized applications. BuildBear Labs' platform is dedicated to dApp development and testing, offering developers the ability to create customised Private Testnet sandboxes across multiple EVM and EVM-compatible blockchain networks, with features including private faucets for unlimited Native and ERC20 token minting.

  • Multiple incidents of stETH being stolen and cross-chained to the Blast mainnet were discovered. The victim’s mnemonic words/private keys may have been leaked.

    SlowMist founder, Yu Xian, posted on X platform stating that SlowMist and MistTrack have received at least four cases of stETH being stolen and cross-chain transferred to the Blast mainnet. The common feature is that a small amount of ETH transaction fee is sent from an address with obvious traces (including exchanges) to the stolen address, and then stETH is cross-chain transferred to the Blast mainnet for subsequent transfer, and finally the remaining small amount of ETH in the victim's address is transferred to different ETH addresses. The known loss exceeds 100 stETH, and it is likely a group event. The mnemonic phrase/private key of these victims must have been leaked, and the attackers lurked to start on the Blast mainnet. Previously, Scam Sniffer monitoring showed that a certain address lost over 10 BTC pledged on Aave and some PANDORA due to interaction (clicking on the signature authorization) with a fake Blast airdrop website, with a total loss of approximately $717,817.

  • Hong Kong has closed the application for virtual asset trading platform licenses, and a total of 22 virtual asset trading platforms are waiting for approval.

    The Hong Kong Securities and Futures Commission website shows that the deadline for virtual asset trading platform license applications was yesterday (29th). As of the update on February 28th, there were a total of 22 virtual asset trading platform applicants.The applicants include Bybit, OKX,,, HTX, Bullish, and others.Ammbr, BitHarbour, and Huobi HK withdrew their applications, while Meex had its application returned by the Securities and Futures Commission.In addition, virtual asset trading platforms operating in Hong Kong that did not submit license applications to the Securities and Futures Commission by yesterday (29th) must end their business in Hong Kong by May 31, 2024, at the latest.

  • In February, NFT sales on the Bitcoin chain were approximately US$301 million, down nearly 10% from the previous month.

    According to cryptoslam data, the sales of NFTs on the Bitcoin blockchain in February reached $301,983,035.33, a decrease of nearly 10% from the previous month's $335,121,977.66, and the fourth-highest monthly sales to date. The total number of NFT transactions on the Bitcoin blockchain in February was approximately 203,000, a decrease of about 18.4% from the previous month. In addition, there were 67,139 independent buyers and 57,724 independent sellers of NFTs on the Bitcoin blockchain last month.

  • Attorneys general of many U.S. states: SEC is expanding the definition of “investment contract”

    Law enforcement officials from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas submitted a joint amicus brief (or friend of the court brief) to the United States Securities and Exchange Commission in the lawsuit against Kraken on Thursday. The brief states that the states are not supporting the exchange, but rather opposing federal regulatory agencies. If the SEC wins, it may prioritize state consumer protection laws and state regulations surrounding cryptocurrencies.

  • Ethereum mainnet interaction costs rise sharply

    On March 1st, due to the heat of the market and the rise in the price of Ethereum, the interaction cost on the Ethereum mainnet has significantly increased. In the past 24 hours, the lowest average value of Gas on the Ethereum mainnet was about 50 gwei, under which:

  • Blockchain data analysis company Octav completes US$4 million in strategic financing

    According to official sources, blockchain data analysis company Octav has announced the completion of a strategic investment of $4 million. The funding round was led by high net worth individuals in the cryptocurrency space, but their identities have not been disclosed. Currently, Octav is primarily focused on unlocking the potential of on-chain data using machine learning technology to improve the accuracy of data labeling and classification. Its clients include Gelato, Request Finance, and Alchemix.

  • Validation Cloud raises $5.8M in funding for its Web3 technology platform.

    Swiss Web3 tech company, Validation Cloud, has secured $5.8 million in its inaugural funding round. The investment was led by Cadenza Ventures, with participation from Blockchain Founders Fund, Bloccelerate, Blockwall, Side Door Ventures, Metamatic, GS Futures, and AP Capital. The funds will be used to expand the company's operations and development efforts. Validation Cloud's innovative system architecture, dubbed the "Cloudflare of Web3," provides scalable and intelligent Staking, Node API, and Data services, supporting a range of ecosystems from established networks like Chainlink and Hedera to emerging ones such as Aptos, Eigenlayer, and Berachain, laying the groundwork for enterprise adoption.

  • The daily trading volume of spot Bitcoin ETF is approximately US$4.7 billion, the second highest in history

    According to Bloomberg analyst James Seyffart's data, as of Thursday's US stock market close, the daily trading volume of the US spot Bitcoin ETF was about $4.7 billion, lower than the historical high of $7.7 billion set the previous day, ranking the second highest in history. Among them:

  • AI robot company Figure completed US$675 million in financing at a valuation of US$2.6 billion, with participation from Microsoft and others

    AI robot company Figure completed a financing round of $675 million with a valuation of $2.6 billion. This round of financing was participated by Microsoft, OpenAI Startup Fund, NVIDIA, Jeff Bezos (through Bezos Expedition), Parkway Venture Capital, Intel Capital, and Align Ventures.