This episode reveals the four converging forces set to overwhelm the Ethereum staking entry queue, creating significant delays and strategic opportunities for investors in the liquid staking and restaking ecosystems.
The Current State of Ethereum's Staking Queues
- Exit Queue: Unstaking ETH currently takes approximately 43 days, a significant delay for those seeking liquidity.
- Entry Queue: Staking new ETH is much faster, taking only six to seven days.
- Recent Volatility: Leor highlights that these times are not static. In August, the exit queue time doubled from about eight days to over 16, an unprecedented jump for the Proof-of-Stake network, which has only been live since 2022. This volatility underscores the network's sensitivity to large-scale market events.
Four Major Forces Converging on the Entry Queue
- Leor argues that the current low entry queue time is a "red herring" and identifies four key drivers expected to cause a massive spike in wait times heading into Q4. His analysis, grounded in his institutional perspective at Chorus One, provides a forward-looking roadmap for investors.
- The Kiln Security Breach Aftermath: A recent security incident at Kiln, a major institutional staking provider, forced the undelegation of 1.6 million ETH (worth $7-8 billion). Leor predicts this capital will soon re-enter the market.
- "I think a lot of that ETH will find a new home... that's one thing that I think will increase the entry queue as we move forward."
- Digital Asset Treasuries (DATs): Large corporate and protocol treasuries holding ETH are increasingly staking their assets to generate yield. Leor confirms that while many large DATs have already staked, Chorus One is in active discussions with many more that are preparing to enter the market.
- Spot ETH ETF Staking Approval: The approval of staking for spot ETH ETFs, which Leor anticipates for October, is a monumental catalyst. These funds hold approximately $31 billion in ETH, and if a majority is staked, it will introduce a massive, coordinated wave of demand for the entry queue.
- Q4 Seasonality and Market Cycle: Historical crypto market trends point to a potential Q4 price surge. As ETH's price increases, the dollar-denominated value of staking rewards also rises, which typically drives more participants to stake their assets and further congest the queue.
The Single-Queue System: No Shortcuts for Institutions
- Host Steve Erlick clarifies a critical point: regardless of the staking method—be it direct staking, liquid staking, or through an institutional provider—all ETH must pass through the same, single-file entry queue on the Ethereum protocol.
- This "first come, first serve" mechanism means that even large ETF issuers cannot bypass the line. This structural bottleneck is central to the thesis that a surge in demand from any major player will impact all participants.
ETF Liquidity Risks and Inevitable Delays
- The conversation highlights the unique constraints on ETF issuers. They are legally required to provide daily liquidity for their shares, making the multi-week staking and unstaking delays a significant operational risk.
- This risk prevents them from "proactively" staking ETH before receiving explicit SEC approval.
- Once approved, issuers are expected to move in unison, creating a "big pile on" that will almost certainly lead to a sudden and dramatic increase in the entry queue wait time.
Actionable Insights: Who Benefits from the Looming Congestion?
- Leor identifies specific sectors and protocols that are positioned to benefit from the anticipated staking delays, offering investors a clear map of potential opportunities. He cautions listeners to do their own research before investing.
- Liquid Staking Protocols: These services offer users a tradable token (an LST, or Liquid Staking Token) representing their staked ETH, providing immediate liquidity.
- Lido (LDO): The market leader with $37 billion in Total Value Locked (TVL).
- Rocket Pool (RPL): Noted for its more decentralized validator set.
- Key Risk: Leor warns investors to be mindful of potential depegs, where the LST's price temporarily diverges from the price of ETH, and to consider the available liquidity when swapping large amounts.
- Restaking Protocols: These protocols allow users to repurpose their staked ETH to secure other networks, known as Actively Validated Services (AVSs), in exchange for additional yield.
- EigenLayer: The dominant player with $19 billion in TVL.
- Ether.fi (ETHFI): A prominent liquid restaking protocol with $11 billion in TVL.
- Renzo (REZ): Another key protocol in the restaking ecosystem.
Conclusion
This episode details how a security breach, institutional treasuries, ETF approvals, and market seasonality are converging to create an imminent bottleneck in Ethereum's staking queue. For investors and researchers, this signals a critical need to monitor queue dynamics and strategically evaluate liquid staking and restaking protocols as essential tools for navigating the coming liquidity crunch.
