jakiro
Jessy, bitchain vision
Recently, Ethereum has staged a rare wave of pledges in history. More than 900,000 Ethereum is queued to enter the exit queue, waiting for unlocking, and the maximum unlock waiting period is 16 days.After hitting the high of US$4,789, the price of Ethereum fell for nearly a week in the past day, falling to a low of just over US$4,000.
Is it because too many Ethereum queued to unlock, which has caused market concerns, which has triggered a decline in Ethereum?Why are there such a huge amount of funds eager to leave?What kind of market logic is hidden behind this?
Chain reaction of 900,000 ETH queued to unstake
To understand this wave of de-staking, we must first understand Ethereum’s POS mechanism.Since Ethereum switched to the “POS” mechanism, validators can participate in network block production and transaction verification by staking at least 32 Ethereum. In return, stakingrs can obtain an annualized return of about 2%–4%.
Unlike traditional financial markets, Ethereum’s staking mechanism is not available for entry or exit at any time.To maintain network stability, the Ethereum protocol sets an exit limit: for each epoch (approximately 6.4 minutes) allows only a limited number of validators to exit.This mechanism ensures that network security will not plummet due to large-scale redemptions in a short period of time.But it also means that when the demand for exits is concentrated, there will be a “queuing phenomenon” that lasts for more than ten days.
The most direct fuse of this unlocking wave actually stems from the decentralized financial lending agreement, especially the abnormal soaring ETH lending interest rates on the Aave platform.
Galaxy Research article pointed out that starting from July 14, ETH lending rates on the Aave agreement began to soar cyclically.While lending rates typically range between 2% and 3%, interest rates soared to 18% on July 16, 18 and 21.
The volatility was caused by a sharp decline in ETH supply on the Aave platform, and the incident was caused by a wallet associated with the HTX exchange withdrawals from the platform.Since June 18, the wallet has withdrawn more than 167,000 ETHs.The sudden decrease in ETH deposits puts pressure on users who run ETH cycle strategies on the Aave platform and has also led to a surge in partial redemption requests.
Under Aave’s algorithmic interest rate model, interest rates automatically soar when borrowing demand far exceeds its available supply for borrowing.
This drastic interest rate change directly destroyed the “ETH cycle leverage” strategy widely used by many investors.When the borrowing cost (18%) far exceeds the Ethereum staking yield (about 2.9%), the strategy is no longer a profit amplifier, but a loss-making machine.Faced with the sharply rising capital costs, a large number of traders and institutions that adopt such strategies are forced to “deleverage”. The only option is to unlock the pledged ETH to repay high-interest loans.This forced and large-scale closing behavior constitutes the main body of the exit queue this time.
Unsolicited ≠selling, this is not a crisis but a sign of Ethereum’s maturity
However, there are indeed big players who are taking profits.Prior to this, ETH prices experienced strong gains, at one point almost hitting new highs, with assets locked in by many early pledgers earning huge gains.Choosing to exit near the price highs, unlocking the pledged ETH and selling it in the secondary market is a classic operation to lock in profits and achieve return on investment.Therefore, a considerable portion of the exit queue ETH comes from these long-term investors.
The concentrated closing of leverage strategies triggered a chain reaction in the market, creating an entry opportunity for the third force, arbitrageurs.
When a large number of users are eager to sell liquid staking tokens (such as Lido’s stETH) to repay loans, a brief “decoupling” between their prices and the underlying asset ETH, which provides opportunities for keen arbitrageurs with keen sense of smell.They buy a large number of liquid staking tokens at a discounted price and then redeem these tokens as ETH through official channels at a 1:1 ratio, thus achieving risk-free profits.This arbitrage behavior undoubtedly further increases the length and size of the exit queue.
But it is worth emphasizing that although the current Ethereum price has fallen due to potential selling pressure, this unlocking wave is not a crisis signal.On the contrary, this proves the strong resilience of the Ethereum PoS mechanism and ecosystem.Market participants’ behavior is based on clear economic signals, not panic.Ethereum’s exit mechanism runs smoothly according to the design and handles unprecedented request volume in an orderly manner.
This means that this is not a crisis, but rather a powerful proof of Ethereum’s maturity as a decentralized financial economy.The Galaxy Research article also pointed out that despite large withdrawals, new pledge demand remains strong, almost offsetting the impact of withdrawals.This shows that the market remains confident in the long-term prospects of Ethereum.
