US debt ceiling, declining trust in banks send ETH staking to record highs

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US debt ceiling, declining trust in banks send ETH staking to record highs
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The number of staked Ether (ETH) in May reached a new all-time high of 2.96 million ETH, approximately 2.46% of the total supply.

The amount of ETH staked in May does not include withdrawals and is more than twice as big as the second-highest amount registered in February 2022.

Monthly amount of staked Ether since November 2020. Source: Dune

The significant surge in staked ETH comes within a month of the Shapella upgrade on April 12, allowing validators to withdraw their staked ETH after two years. Many then believed the heavy unstaking of ETH could be a bearish event for the Ethereum network. However, an estimated less than 1% of all staked ETH was sold after Shapella.

In the week after Shapella, nearly a million ETH were withdrawn by validators from the Beacon Chain. However, with the start of May, the number of staked ETH already surpassed the number of withdrawals. At present, almost 18% of all ETH staking was done in May.

Monthly ETH deposits by staking entities. Source: Twitter

The record surge in Ethereum staking in May was attributed to several factors, the most prominent being the United States debt ceiling saga, confidence in the U.S. dollar, bank collapses and the high annual percentage rate (APR) offered on ETH staking. According to research analyst Brian McColl:

“The U.S. Debt ceiling saga and the earlier events with banks going bankrupt surely affected Ether’s popularity, and more and more users prefer to stake their money in ETH rather than keep them in the bank.”

The debt ceiling in the U.S. is a statutory cap on the total amount of national debt the U.S. Treasury may incur, limiting the amount of money that the federal government may borrow to pay off its existing debt.

Related: Bitcoin hodlers exited ‘capitulation’ above $20K, new metric hints

As Cointelegraph reported earlier, President Joe Biden and U.S. House majority leader Representative Kevin McCarthy agreed to raise the $31.4 trillion debt ceiling. However, financial pundits, including BlackRock CEO Laurence Fink, have warned that the drama around the debt ceiling could deteriorate global trust in the U.S. dollar.

McColl also noted that the current APR is approximately 5.4%, which offers better deposit conditions than most banks around the world, making Ethereum staking a popular choice.

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