Institutional-grade ether staking service providers have seen a surge in inflows in April, with some recording three times larger inflows compared to the previous month. ConsenSys analyst Michiel Milanovic told CoinDesk that 80% of the inflows happened after the highly anticipated Shanghai or Shapella upgrade of Ethereum blockchain on April 12. The upgrade enabled withdrawal of 18 million tokens, worth $35 billion, previously locked up in staking contracts. ETH’s price also rallied to $2,100, its highest level in 11 months, after the upgrade.
Allowing withdrawal reduced liquidity risk, which has kept some investors at bay, and is expected to naturally increase staking rates. Kiln, an institutional-grade staking service provider, reported that 68% of investors intend to start staking or increase their staked amount after Shanghai. The firm received a fresh wave of interest even from traditional finance firms. Kiln recorded $47 million (24,640 ETH) of new deposits since the Shanghai upgrade. Rival platform Staked.us experienced double the inflows of staking rewards withdrawn in April.
However, it is too early to draw definite conclusions given not all staking providers have enabled withdrawals immediately. ConsenSys analyst Milanovic noted that the market is still in a stage of discovery with increasing institutional adoption. There remains uncertainty on how ETH staking will impact the network, as demonstrated in the March crash that saw ETH’s largest daily outflows from exchanges.
At Consensus 2023, featured speaker Jenny Johnson, President and CEO of Franklin Templeton, will discuss developing crypto-linked investment products in a bear market, the mood among her clients, and her long-term outlook on the crypto sector. Johnson, who is also a board member of the Blockchain Association, has expressed interest in blockchain technology and called for better regulation in the sector to provide clarity for businesses like Franklin Templeton.
Franklin Templeton is not the only traditional finance institution to show interest in blockchain and digital currencies. Goldman Sachs recently announced the restart of its bitcoin trading desk, which it shuttered in 2018, to cater to the growing demand for digital assets. The firm aims to offer a range of investment vehicles in the space. Similarly, JPMorgan has launched its own digital currency, JPM Coin, and is exploring blockchain applications in areas such as cross-border payments and securities settlement.
The trend of traditional finance institutions moving towards digital assets and blockchain technology is expected to continue. A survey by the Bank for International Settlements (BIS) showed that 60% of central banks are exploring the benefits of digital currencies and over 10% are planning to issue one in the short term. Moreover, over 90% of the central banks surveyed are exploring the potential use of CBDCs for wholesale payments and settlement.
The increasing institutional adoption of digital assets and blockchain technology has also led to the rise of DeFi or decentralized finance. DeFi platforms aim to provide open-source financial solutions and replace traditional financial intermediaries with smart contracts on blockchain networks. The total value locked in DeFi platforms reached an all-time high of $88.09 billion in February, up from $16.21 billion in January 2021. While the DeFi space presents exciting opportunities, it also poses regulatory challenges and risks, as demonstrated by the recent hacks and scams in the space.
In conclusion, the institutional adoption of digital assets and blockchain technology is accelerating, driven by the increasing demand for alternative investments and the benefits of decentralized finance. Traditional finance institutions are stepping up their efforts in the space, with some even re-entering the market after exiting in 2018. Regulatory clarity and risk management will be key factors in determining the success of the sector. At Consensus 2023, featured speaker Jenny Johnson will offer insights on developing crypto-linked investment products and her long-term outlook on the crypto sector amid the increasing institutional adoption.