Ethereum stakers head for the exit, causing $3.8bn logjam

If you’re looking to unstake your Ethereum, you’d better pack a lunch — and maybe a few spares.

The validator exit queue has swelled to an all-time high of more than $3.8 billion worth of Ether, with average wait times now exceeding 15 days.

That’s a major shift from the norm since Ethereum’s switch to proof-of-stake in 2022. Before mid-June, delays longer than 24 hours were rare and short-lived.

Staking is the process of locking up ETH to help secure the network in return for yield, while unstaking is withdrawing those funds.

The exodus is being driven largely by liquid staking platforms. Over the past month, Lido, Ether.Fi, and Coinbase have seen a combined 573,000 Ether, worth around $2.5 billion, withdrawn, accounting for the lion’s share of recent exits.

DeFi researcher Ignas partially attributes the mass unstaking to a broader unwinding of leveraged staking loops.

It’s a once-popular strategy where users staked Ether for tokens like stETH, borrowed Ethereum on Aave using that token as collateral, and repeated the cycle to boost yield.

But when Aave’s borrow rates spiked to over 10% in late July following a $1.7 billion Ether withdrawal (largely attributed to Justin Sun), the math broke down.

Loopers scrambled to unwind positions, triggering a cascade of unstaking activity from liquid staking providers who had backed those DeFi strategies.

“Even if borrow rates stabilize,” Ignas warned, “loopers are worried that stETH or other LST depegs could cause position liquidations. Better to unwind now and stay safe.”

The wave of withdrawals may also be preparation for upcoming Ethereum staking ETFs. New SEC guidance in early August clarified that liquid staking tokens are not securities, potentially clearing the way for more institutional interest.

Still, some early holders may simply be taking profits or reallocating after Ethereum’s rebound to a four-year high above $4,500 — up 180% from just four months ago.

Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.