Author: Sean Rose, Glassnode; Translated by: Wuzhu, Golden Finance

Preface

In this article, we turn our attention to the Ethereum landscape. The first quarter of 2024 will be crucial for Ethereum, with major developments that are changing the way it operates. The Dencun upgrade enhances Ethereum’s scalability and reduces transaction costs. Meanwhile, the price of Ethereum reached $4,000, a level not seen in two years. Ethereum staking also increased significantly during this period. In this article, we will examine these changes and discuss their wider impact on the Ethereum network.

Ethereum Staking Updates

Staking Overview

In Ethereum’s Proof of Stake (PoS) mechanism, staking involves locking up ETH tokens to support the operation and security of the blockchain. Validators stake their ETH to confirm transactions, and in return they receive rewards in the form of newly issued ETH and transaction fees. This process secures the network and encourages participation by providing returns on staked assets.

Staking Growth

The Ethereum staking landscape changed in Q1, with staked ETH increasing by 9%. This growth was driven by new developments such as Maximum Extractable Value (MEV), Liquidity Staking, Re-staking, and Liquidity Re-staking. These innovations introduced new incentives to encourage more staking activity, with the Eigenlayer airdrop being a factor that specifically boosted re-staking and liquidity re-staking activity.

Stakeholders

The Ethereum staking ecosystem includes a wide range of participants, from individual investors to large institutions. Institutional stakeholders use these opportunities to earn yield on their large ETH holdings. Liquid staking protocols like Lido and Rocket Pool are important because they provide tradable tokens representing staked ETH, helping stakers maintain liquidity and making participating in Ethereum PoS more attractive.

Ethereum Derivatives Market and Open Interest

Open interest rises

Open interest represents the total number of unsettled derivatives contracts, such as futures and options. The Ethereum derivatives market is seeing significant growth, with options open interest increasing by 50% to hit new highs. This growth demonstrates the increasing involvement of traders and institutional investors in Ethereum’s financial products.

Market maturity

The growth of the Ethereum derivatives market is evident in the advanced and diverse trading strategies adopted by traders. This progress has increased market depth and liquidity, allowing for more sophisticated investment and hedging options. This maturity indicates that Ethereum is being more widely accepted and integrated into the traditional financial system.

Drivers of Increased Open Interest

The increase in open interest in the first quarter was caused by several related factors. Mainly, Ethereum often follows the market trends of Bitcoin. This connection is obvious because both the Ethereum and Bitcoin derivatives markets have responded to the excitement and speculation caused by the development of Bitcoin ETFs. The anticipation of these ETFs has not only increased activity in the Bitcoin market, but also affected Ethereum, affecting its derivatives landscape.

in conclusion

Overall, recent changes in Ethereum staking and derivatives markets, as well as the Dencun upgrade, indicate significant changes in its ecosystem, affecting network functionality and investment dynamics. As Ethereum increasingly mirrors Bitcoin's trends, investors need to adjust their strategies. Understanding the interplay between these upgrades and market changes is critical to optimizing investment approaches, managing risk, and taking advantage of opportunities in Ethereum's expanding role in financial markets.