EigenLayer Sapping ETH or Bulls Incoming?

Ethereum Token Terminal

The Ethereum (ETH) balance in multiple mainstream centralized exchanges, like Coinbase and Binance, has hit a new low. According to Leon Waidmann on X, over 7 million ETH have been withdrawn since April 2023. 

Is It DeFi, NFT, Or EigenLayer Sapping ETH From Exchanges?

This decline is net bullish for the coin, possibly hinting that other on-chain activities like non-fungible token (NFT) minting or decentralized finance (DeFi) are taking center stage. 

Ethereum price trending sideways on the daily chart | Source: ETHUSDT on Binance, TradingView

Coincidentally, the drop also comes amid the rise of “restaking” enabled by protocols like EigenLayer. The platform is garnering interest, sparked by its ongoing airdrop, which is set to incentivize participation.

Technically, coin outflow from centralized exchanges is a leading indicator for increasing scarcity and bullish sentiment. 

Users use centralized exchanges like Binance or Coinbase as conduits to either shift to stablecoins or fiat or participate in DeFi or NFT since they can easily purchase coins. 

However, with less ETH readily available on exchanges and on-chain activity rising, the demand for the coin will increase, possibly supporting prices. 

So far, DeFiLlama data shows that the broader DeFi ecosystem is improving as the total locked value (TVL) expands. When writing on February 5, DeFi had a TVL of over $58 billion, up from around $36 billion registered in mid-October 2023. Out of this, Ethereum protocols manage over $32 billion.

DeFi TVL | Source: DeFiLlama
DeFi TVL | Source: DeFiLlama

Beyond DeFi and NFTs, the contraction in ETH held in exchanges can be attributed to the incentives of EigenLayer and the expected airdrops.

EigenLayer Attracts Ethereum Restakers

EigenLayer is a restocking platform allowing ETH stakes in platforms like Rocket Pool, for instance, to “re-stake” and earn additional rewards by securing other protocols. With the promise of more rewards, this offer appears to accelerate the withdrawal of exchanges from centralized exchanges. 

As of February 5, EigenLayer supports restaking staked ETH from over ten protocols, including Swell, Lido, Rocket Pool, Ankr, and Coinbase. The platform also supports Beacon Chain node operators to restake, earning rewards. 

Supported ETH liquid restaking platforms | Source: EigenLayer
Supported ETH liquid restaking platforms | Source: EigenLayer

With EigenLayer restaking popular, it is not immediately clear how the sphere will evolve or how ETH staking will develop. 

However, for benefiting protocols, the idea means they can customize their foundations to not adhere to Ethereum’s strict staking requirements. At the same time, costs will be reduced when launching. 

Though restakers stand to receive more rewards, experts worry that this would overload Ethereum, negatively impacting performance.

Feature image from Canva, chart from TradingView



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