Ethereum Progresses Towards Key Catalyst

Lucas Outumuro
Published in
5 min readMar 18, 2022


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We’re leaving talk on the macro situation for another time. This week we focus exclusively on progress being made within crypto and the effects likely to come about.

Specifically, we dive into Ethereum 2.0 getting closer, the impact of Instagram NFTs and the booming liquid staking sector.

Weekly Fees — Sum of total fees spent to use a particular blockchain in a week. This tracks the willingness to spend and demand to use Bitcoin or Ether.

  • Both Bitcoin and Ethereum recorded double-digit decreases in fees accrued by their networks
  • In four out of the last five weeks, Ethereum fees dropped over 20% relative to the prior week

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges over the past seven days. Crypto going into exchanges may signal selling pressure, while withdrawals potentially point to accumulation.

  • Over a billion worth of Bitcoin was withdrawn from centralized exchanges, making it the second week where this happens in 2022; first time it happened Bitcoin’s price hovered around $36,000
  • Hundreds of millions of Ether were withdrawn as well, recording the highest single day net outflow so far this year

Ethereum Progresses Towards Key Catalysts

While investors’ attention has been glued to macro news, the crypto space continues to progress in key areas. A perfect example of this can be seen with Ethereum successfully launching a testnet for its much-awaited merge of the proof of work and proof of stake chains. This took place just a few days after Ethereum staking reached another milestone.

Via IntoTheBlock’s Ethereum staking indicators

10 Million ETH — 8-figures of Ether are now deposited into the proof of stake contract

  • This represents approximately 8.3% of all ETH in circulation
  • The amount of ETH staked has grown by 20% in the last 90 days and 10% in the past 30 days alone

Despite network activity continuing to drop, savvy investors appear to be taking note of the progress with ETH 2.0.

Via Ethereum’s exchange on-chain flows

Largest Outflows in 2022 — over 180k ETH was withdrawn from centralized exchanges within a single day

  • Last time such a magnitude of ETH left exchanges was in October 2021, preceding a 15% price increase within ten days
  • Exchange outflows can signal accumulation from investors looking to safely hold their assets on cold storage or earn yield on them
  • Looking deeper on-chain, we observe that approximately 190k ETH was deposited into Lido’s stETH liquid staking on the same day (a topic which we’ll discuss more later)

Meta NFTs — in other news, Mark Zuckerberg confirmed that Instagram will be launching NFTs

  • Instagram CEO had previously suggested the company was exploring this
  • While details remain unclear, Instagram NFTs would be a major force of adoption for crypto

These could also result in ETH’s supply dropping sharply.

Via IntoTheBlock’s Ethereum supply metrics

ETH-burning JPEGs — NFT trading activity has been the largest burner of Ether since the introduction of EIP 1559

  • OpenSea activity alone has led to 230k ETH no longer being in circulation as per
  • As NFT volumes peaked in January, Ether’s net issuance dropped to historic lows of nearly -2%
  • Following the merge the amount of ETH issued is projected to drop by 90%, which would lead similar levels of fees to reduce Ether’s supply by as much as 5% a year

Thus far it remains too early to know on top of what platform Instagram will launch NFTs. Will they move forward with their own blockchain despite regulatory hurdles? Do they choose Ethereum which currently supports over 80% of NFT volume? Or do they opt for more scalable chains like Solana or Polygon to be able to reach wider audiences?

Liquid Staking Gains Momentum

Proof of stake has positive impacts for crypto such as reduced energy usage, increased security and greater yields. Through the merge with the proof of stake chain, fees previously earned by miners will pass on to being earned by those staking. This is expected to result in staking rewards between 7% and 12%.

Through Twitter thread on staking rewards

3 Main Factors — staking rewards following the merge of Ethereum depend on the following:

  1. The amount of ETH staked. Greater amounts staked result in lower APRs per ETH deposited
  2. Network fees. High fees now not only burn more ETH, but will also result in higher earnings for those staking their ETH
  3. Percentage of ETH burnt. This adjusts dynamically, averaging 85% historically but going lower to 80% recently, meaning a higher portion of fees will be awarded

Overall, these factors all project significantly higher returns than the current 4% received by those staking through Lido’s stETH, the largest liquid staking token.

Via IntoTheBlock’s Lido financial indicators

Greater revenues — Since a portion of staking rewards are obtained as revenue for the Lido DAO, the price of their governance token (LDO) has been appreciating

  • Wider utility within DeFi has also expanded the use-cases for stETH, benefiting LDO
  • With over 2.5M ETH deposited into stETH, Lido is one of the largest entities staking Ether
  • LDO has been of the best price performers over the past 30 days

Beyond Ethereum — Liquid staking has expanded into multiple blockchains, recently launching on Avalanche and Polygon. Ultimately, these solutions improve the security of their underlying networks while making it more useful and simpler for users to stake.

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Lucas Outumuro

Head of Research @IntoTheBlock. Actively researching token economics, DeFi and technology broadly. Twitter: