Over the weekend, there was a rush for the exits from the world’s largest Proof-of-Stake blockchain. As of 20:00 UTC Sunday evening, staters queued up 893,599 ether (ETH) to unstake their $4 billion out of the Ethereum network.
Ethereum limits the quantity of ETH that may unstake per 6.4 minute epoch. If more ETH is being unstated than what can be processed in the upcoming epoch, extra ETH must wait in queue.
As of 2:00 UTC Sunday morning, Ethereum’s unstaking wait time also lengthened to its worst validator queue in history: 15.5 days.
Source: ValidatorQueue.com
There was one leading explanation for the lengthy, multi-billion dollar queue.
ETH staking within US ETFs
According to one observer, the SEC is imminently ready to approve ETH staking within US spot ETFs. US residents who previously staked their ETH via Coinbase or a staking pool like Lido would soon have the option of easily earning staking rewards within publicly-traded ETFs.
Someone else criticized this Paul Atkins-led SEC plan to approve staking income within ETFs, “I can’t wait to hold my centralized premined security in an ETF that I have no control over,” they said.
Another skeptic echoed that sentiment, “So more middlemen.”
Still, if the market is planning on a staking approval for ETFs, that news could explain some of this weekend’s record-setting level of unstaking requests.
Read more: Ethereum’s largest staking service finally regains stETH peg
Unwinding loops from higher borrow rates
Another explanation involves borrow rates for ETH that have been increasing dramatically since July 16 and unwinding loops.
Loops, in the parlance of decentralized finance (DeFi), are risky trades that involve re-depositing the proceeds of loans as collateral for additional loans. Loops add leverage to Ethereum’s paltry 2.9% APR staking reward, offering double-digit or even triple-digit rates at the highest number of loops.
Galaxy Research blamed, in part, the Justin Sun-affiliated HTX exchange for spiking ETH borrow rates on Aave, a dominant lending protocol. They also noted knock-on effects from HTX’s large unstaking, including a de-pegging of liquid staking and restaking tokens from the price of ETH.
