Ethereum Staking Validator Power is Now Highly Centralized

This concentration of power has reignited discussions about Ethereum‘s decentralization model. The dominance of a few entities raises concerns about the network’s future governance and liquidity.

Meanwhile, the surge in staking activity, coupled with around 19% of ETH locked in long-term holdings, is reducing the liquid supply available for trading.

As a result, ETHs float is approaching levels not seen since before the Merge, causing thinner order books and increased market volatility. Moreover, ETH spot markets are experiencing sharper price swings, which is amplifying both rallies and corrections.

In addition, DeFi platforms are also feeling the squeeze. Sentora pointed out that borrowing rates for liquid staking tokens like stETH, rETH, and frxETH are rising.

Sentora noted that these tokens may feel the pinch if their unit collateral grows scarcer. This could potentially force the lending protocols to adjust their strategies to accommodate the tightening market.