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The reasons behind this recent drop are myriad, ranging from speculators banking on a new airdrop to others who are worried the merge won't go quite as planned.
Hildebert Moulié, a data scientist at Dragonfly Capital who goes by the handle hildobby on Twitter, told Decrypt that the sharp decline in the number of weekly Ethereum deposits to the Beacon Chain could be related to speculation.
Some investors, for instance, might believe that the short-term returns could be higher if they just held their coins in the hope of getting some ETHPOW—the cryptocurrency that could result from a controversial attempt to resist the merge via an Ethereum hard fork.
On Lido, the leading Ethereum staking service that commands more than 30% of the staking market, stakers can earn 3.9% on their Ethereum. In doing so, though, they will likely miss out on an airdrop should the network fork. Even the possibility of missing out on such a bounty may have scared off newcomers.
Moulié also suggested that the recent decline indicates that those who wanted to stake have already done so, highlighting the fact that more than 11% of Ethereum’s entire circulating supply has already been staked.
After that, he told Decrypt that “others may want to wait post merge to make sure nothing goes wrong then." So far, various Ethereum testnets have already successfully executed a merge; but that doesn't mean that launching the network's largest-ever upgrade is a sure thing.
Finally, Moulié pointed to the market momentum, which “has been quite terrible lately,” and could fend off those considering depositing their ETH.
When Ethereum Merge?
The second-largest cryptocurrency is set to transition from the proof of work (PoW) consensus mechanism to a more environmentally friendly proof of stake (PoS) mechanism next month, with the much-anticipated event known as the merge attracting plenty of attention.
The Beacon Chain—the PoS-based coordination mechanism of the new network—has been running in parallel with Ethereum’s current mainnet since December 2020, when investors were first invited to deposit their coins to operate as validators.
The total amount of ETH deposited to the Beacon chain is currently standing at over 13.3 million, which represents 11.18% of Ethereum’s circulating supply.
However, the number of weekly ETH deposits has been steadily declining since the beginning of May, recently reaching the lowest levels ever seen.
The week ending August 22 saw just 12,377 deposits to the Beacon Chain—a sharp contrast to more than 500,000 deposits made throughout the week ending March 14.
Under a month before the merge and the amount of $ETH sent to the Beacon Chain for staking is at all time lows lately 🥩🤔
— hildobby ＞|＜ (@hildobby_) August 22, 2022
Ethereum is up 4.4% over the past 24 hours, trading around $1,640 by press time, however, is down more than 55% since the start of the year.