Crypto investors are committing more tokens to securing blockchains even as rewards fall, with improving access helping drive demand while the economics of staking face a broader test.
“Ethereum now has more stake securing it than at any point in its history, with 43.8 million ETH staked or 35.9% of the total supply,” Kam Benbrik, head of onchain research at Bitwise, told CoinDesk.
Solana’s active stake climbed to 440.5 million SOL, according to Bitwise’s Q4 staking report.
Yet gross annualized staking yields fell on both networks.
The divergence raises questions about what drives investors to stake, how much they ultimately earn, and whether growing blockchain activity can offset declining returns from token issuance.
Staking involves committing tokens to help validate transactions and secure a blockchain in exchange for rewards. For investors already holding those assets, it provides a way to increase their token balances.
Demand can strengthen during weaker markets, according to John Zettler, senior director of product at Payward Services, the business-to-business arm of Kraken parent Payward.
“Generally, we observe that staking is countercyclical,” Zettler said. “In weaker market conditions, buy-and-hold behavior increases, driving greater staking demand and putting downward pressure on yields.”
Bull markets can reverse those forces, he said. Higher transaction fees can increase rewards, while investors’ preference for liquidity can reduce staking participation and lift yields further.
Access drives adoption
Alongside those market dynamics, industry executives point to a more lasting shift: staking is becoming an established part of holding crypto.
A Coinbase spokesperson said staking exchange-traded funds (ETFs) and digital asset treasuries are broadening access.
“Rather than seeing balances shift based on short-term movement, retail and institutional investors are buying into the long-term benefits of staking their crypto assets as more opportunities arise,” the spokesperson said.
Zettler said clients typically stake assets they already own, with investment and custody decisions coming before the search for rewards.
“Once those assets are held on a platform, clients consider additional services such as staking, with decisions around asset selection and custody generally coming first,” he said.
Ethereum staking’s operating history has also helped build acceptance, he added.
Institutional conversations now focus increasingly on implementation, according to Kean Gilbert, head of institutional relations at Lido Ecosystem Foundation.
“Institutions are clued up and want to talk strategy: how diversified the validator set is, who audits the code, and how much of a fund is actually staked,” Gilbert said.
Lido is a liquid staking protocol that lets investors stake ether and receive stETH, a tradable token representing their staked assets and accrued rewards.
Custodians have been central to opening access, Gilbert said, allowing institutions to participate through relationships they already use.
“Once custodians began supporting staking, institutions could do it from inside the setup they already trust.”
More capital, lower yields
Ethereum recorded net staking inflows of 1.99 million ETH during Q3, its sixth consecutive quarter of positive inflows. Bitwise identified institutional participation, including treasury company Bitmine’s growing position, as a contributor.
But greater participation puts downward pressure on returns as rewards are spread across a larger amount of staked capital.
Ethereum’s gross annualized staking yield averaged 2.63%, down from 2.81% in Q2. Newly issued ETH contributed 2.53 percentage points, or 96.3% of the total. Priority fees and payments associated with transaction ordering supplied the remainder, Bitwise said.
The source of those rewards matters. Fees come from users paying to transact, while issuance creates additional tokens and dilutes holders’ proportional ownership unless offset by token burning.
Ethereum processed 199.3 million transactions during Q3, up 35.3% from a year earlier. Yet network fees and transaction-ordering revenue averaged 198 ETH a day, down 40.2% from the previous quarter.
Expanded capacity helped lower transaction costs, benefiting users without yet producing stronger fee generation.
Solana showed a different combination of forces with a similar outcome. Activity and fees increased, but gross staking yield fell to about 6%, from 6.38% in Q2. Lower issuance and a larger staking base outweighed the improvement in other rewards. Almost 90% of its gross staking yield still came from issuance, Bitwise said.
Those gross figures also differ from what clients receive after provider charges. Zettler said Payward retains a small portion of rewards to cover operating and infrastructure costs, without specifying a percentage.
He expects further compression on Ethereum.
For Ethereum, I expect staking yields to continue falling as a higher proportion of ETH is staked, before eventually reaching an equilibrium under the protocol’s reward structure,” he said.
Coinbase declined to forecast yields over the next two years, citing differences between protocols and changing network activity.
Managing the liquidity gap
For institutions, the ability to access assets can matter as much as the rewards.
“A fund has to pay out sellers within a day or two, but unstaking ETH can take weeks, so funds that stake typically keep part of it back,” Gilbert said.
He estimated that the average European product is only 50% to 60% staked.
Zettler said longer exit queues discourage participation, particularly when investors anticipate needing liquidity.
“The speed at which they can access liquidity matters, particularly during a market sell-off, when increased demand to exit can extend withdrawal times,” he said.
Payward is working on solutions to provide instant liquidity for clients with staked funds, Zettler said.
Coinbase described withdrawal delays as a routine consideration in institutional liquidity planning, pointing to financing, liquid staking tokens and trading staked vaults as tools available to clients.
Gilbert highlighted WisdomTree’s Physical Lido Staked Ether exchange-traded product as another approach. Holding stETH allows the product to maintain exposure to a fully staked position while using the token’s tradability to help meet redemptions.
Selling a liquid staking token provides an alternative to waiting for the underlying ETH to exit staking, although execution depends on market liquidity and price.
Pressure on operators
Falling rewards also affect the businesses running blockchain infrastructure.
Solana’s active validator count fell to 659 from 696 during Q3, according to Bitwise’s methodology, which counts validators that produced at least one block during the sampled period.
Larger operators can supplement earnings through services such as selling transaction data and have more opportunities to capture unusually valuable transactions, the report said. Those advantages make it harder for smaller competitors to match low commissions.
Ethereum’s falling validator count requires a different interpretation. An upgrade allows operators to consolidate multiple validators into larger balances, meaning fewer validators do not automatically indicate fewer independent businesses.
For investors, improving access and liquidity could encourage further participation even as rewards decline. Gilbert expects staking eventually to become a routine part of holding ether.
“As adoption of staking continues to spread among institutions, I think in five years we’ll be asking why anyone ever held unstaked ETH.”
Originally published at https://www.coindesk.com/business/2026/10/26/institutions-embrace-crypto-staking-despite-shrinking-yields.
