On-Chain Commentary
- March CPI estimates currently show a YoY decline to 5.2%
- Staked Ethereum will finally become fully liquid on Wednesday this week
- The unlock process will be transparent via on-chain analytics
This week’s major macro events are the release of March CPI data and bank earnings. Currently, CPI estimates are around 5.2% YoY, lower than the 6.0% YoY in February. Truflation, a real-time inflation estimate, also indicates that CPI will continue to decrease. Fed funds rate probabilities suggest that there will be one more hike, then a hold at that level, followed by a series of cuts after mid-year. Additionally, the March jobs report showed a drop in the unemployment rate from 3.6% to 3.5%, indicating a tight labor market.
In the digital asset realm, the focus is on the Shapella Ethereum protocol upgrade. Since the launch of Ethereum’s Beacon chain in December 2020, users have been able to stake ETH. Each validator requires 32 ETH but partial staking through staking services is also possible. Any ETH sent to the Beacon chain to stake has been locked on the chain. The Beacon chain ran in concurrence with the main Ethereum chain, which merged with the Beacon chain in September 2022.
This week, all staked ETH will have the ability to become fully liquid and join an unlock queue, allowing users to freely move their coins. The process and magnitude of the unlock will be transparent through on-chain analytics. Glassnode reports around 1,800 validators, or about 58,000 ETH, have already begun to voluntarily exit staking. Validators can also partially withdraw coins above 32 ETH, which don’t provide any additional yield. Users can then roll those rewards into new validators. The estimated ETH staking yield is around 4.26%, which will only improve as ETH is unstaked. Over the next few weeks, this reward dynamic will likely reach an equilibrium, but for now, a high percentage of ETH supply is likely to move around as users make the best decision for their circumstances.
