Kraken Unstaking Over $1 Billion in ETH Following Shapella Upgrade

One of the top cryptocurrency exchanges, Kraken, has allegedly begun the process of withdrawing their staked amount in more than 551,000 ETH, worth over $1 billion. This action is a reaction to regulatory obligations mandating the company to unstake all ether for its U.S. customers. Kraken’s choice is anticipated to significantly influence the cryptocurrency market, particularly ether’s price.

Ether, as one of the most valuable cryptocurrencies, has seen consistent growth in recent times, and the large-scale unstaking by Kraken could lead to a considerable fluctuation in its value. This development also underscores the growing regulatory oversight experienced by cryptocurrency businesses as governments worldwide aim to strengthen control over the sector.

Anticipated wait time for Kraken in validator exit queue

With the launch of ether (ETH) withdrawals post the Shapella upgrade, Kraken, the well-known U.S. cryptocurrency exchange, has allegedly commenced the withdrawal procedure for their staked assets, resulting in a substantial increase in withdrawal requests surpassing $1.5 billion. These requests consist of both partial and complete exits, following the staking service provided by Kraken, which simplified the Ethereum staking process by enabling users to deposit funds into the platform and establish validators on their behalf.

This latest occurrence follows Kraken’s recent settlement with the Securities and Exchange Commission (SEC) for purportedly not registering the offer and sale of its staking program in the U.S. Kraken agreed to a $30 million fine as part of the settlement, emphasizing the heightened regulatory scrutiny faced by the cryptocurrency sector. Regardless of the settlement, Kraken’s recent actions to start the withdrawal procedure for their stakes could have significant consequences for ether’s value and the broader cryptocurrency market, as investors prepare for a potential market alteration.

Kraken’s requested withdrawal of more than 551,000 ETH, valued at $1 billion, accounts for over 65% of the total ETH waiting to be withdrawn from the network, according to Nansen data. This figure does not include Kraken’s entire staked sum, which stands at 1.25 million ETH or $2.5 billion on the Ethereum network.

Possible effect of Kraken’s withdrawal request on ether’s value

In response to regulatory requirements, Kraken had previously disclosed its plan to automatically unstake all ether for its U.S. clients. Even though the exchange has requested to exit validator stakes, it remains subject to the validator exit queue wait time on the Ethereum network.

Kraken presently ranks as the third-largest stakeholder on the Ethereum network, as per the Dune Analytics dashboard, following Lido Finance and Coinbase. However, Kraken is expected to climb the ranks and assume the second position once the withdrawal queue is cleared, which should occur within a few days.

The Ethereum network currently holds 17.4 million staked ether, excluding rewards, representing 15% of the total ether supply. Since the implementation of the Shapella upgrade, the net staking balance has dropped by 94,581 ether, worth $189 million, based on Nansen data. This situation could potentially impact ether’s overall value, as more investors might choose to emulate Kraken and remove their stakes from the network.