US debt ceiling, declining trust in banks send ETH staking to record highs

The number of staked Ether (ETH) in May reached a new all-time high of 2.96 million ETH, approximately 2.46% of the total supply.

The amount of ETH staked in May does not include withdrawals and is more than twice as big as the second-highest amount registered in February 2022.

*Monthly amount of staked Ether since November 2020. Source: Dune*

The significant surge in staked ETH comes within a month of the much anticipated Shapella upgrade on April 12, allowing validators to withdraw their staked ETH after two years. Many at the time believed the heavy unstaking of ETH could prove to be a bearish event for the Ethereum network. However, less than 1% of all staked ETH was estimated to be sold after Shapella.

In the first week of the unstaking event, nearly a million ETH were withdrawn by validators from the Beacon chain. However, with the start of May, the number of staked ETH already surpassed the number of withdrawals. At present, almost 18% of all ETH staking was done in the month of May.

*Monthly ETH deposits by staking entities. Source: Twitter*

The record surge in Ethereum staking in the month of May was attributed to a number of factors, the most prominent being the United States debt ceiling saga, deterring confidence in the U.S. dollar, the downfall of banks and the high APR offered on the ETH staking. According to research analyst Brian McColl,

“The US Debt ceiling saga and the earlier events with banks going bankrupt surely affected Ether’s popularity and more and more users prefer to stake their money in ETH rather than keep them in the bank.”

The debt ceiling or debt limit in the U.S. is a statutory cap on the total amount of national debt that the U.S. Treasury may incur, limiting the amount of money that the federal government may borrow to pay off its existing debt.

As Cointelegraph reported earlier, President Joe Biden and House majority leader Representative Kevin McCarthy reportedly reached an agreement to raise the $31.4 trillion debt ceiling. However, financial pundits including BlackRock CEO Laurence Fink have warned that the drama around the debt ceiling could detroit the global trust in the U.S. dollar.

McColl also noted that the current annual percentage rate (APR) is approximately 5.4% which offers better deposit conditions than most banks around the world and has also made Ethereum staking a prominent choice in May.

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