Ethereum's Supply Shrinks as Staking and Corporate Holdings Surge

Ethereum's circulating supply is experiencing a significant tightening, with a substantial portion now locked in staking, corporate treasuries, and exchange-traded funds (ETFs). This trend is reshaping the digital asset landscape, shifting ETH away from active trading and potentially influencing market dynamics.

Key Takeaways

• Approximately 45% of all ETH is currently locked or difficult to sell.

• Public companies hold over 6.1 million ETH, representing about 5% of the circulating supply.

• ETFs now account for roughly 10% of total ETH holdings.

• Staking rewards offer a native yield, attracting institutional interest.

The Rise of Ethereum as a Treasury Asset

Public companies are increasingly incorporating Ethereum into their digital asset treasuries, viewing it as a strategic investment. Unlike Bitcoin, which primarily relies on scarcity and market re-rating, Ethereum offers an additional layer of yield generation through staking. Companies can acquire ETH, stake it to earn protocol-native rewards (estimated around 3% APY for treasury-style operators), and then leverage public markets to issue equity at a premium to their underlying assets. This "ETH treasury flywheel" aims to compound holdings in token terms, driven by both equity financing and staking rewards.

Everstake's report highlights major players like BitMine, holding an estimated 4 million ETH, and SharpLink Gaming with approximately 860,000 ETH. These substantial holdings underscore the institutionalization of this strategy, where staking venue, operational posture, and risk controls become integral to the investment case.

Staking Dynamics and Supply Reduction

The proof-of-stake mechanism of Ethereum requires validators to lock ETH as collateral. This process, along with the growing interest from institutional investors, is steadily removing ETH from circulation. Sygnum's report indicates that about 45% of all ETH is now locked or hard to sell, a figure bolstered by ETF inflows and corporate acquisitions. Exchange-held ETH has seen a notable decline, signaling a shift away from readily available supply.

Institutional Staking Preferences

While retail investors often stake through exchanges for simplicity, and DeFi users opt for liquid staking tokens, institutions are increasingly seeking more structured and compliant staking solutions. This has led to a migration away from exchange custody towards "enterprise-grade" staking structures. For instance, Coinbase's share of staked ETH has reportedly decreased, while other platforms catering to institutional needs have seen growth. This diversification in staking venues is crucial for treasury companies, as operator diversification, slashing protection, and custody architecture become core components of their investment strategy.

Broader Market Context

The tightening supply of ETH occurs within a broader context of increasing stablecoin liquidity on Ethereum and the growth of tokenized Treasuries. These developments provide a more defensible narrative for long-term ETH positions, framing it as structural adoption rather than pure speculation. However, risks remain, including potential client outages leading to validator concentration, capital market volatility impacting equity financing, and evolving regulatory landscapes that could affect treasury operations.

Sources

• A sudden shift in Ethereum staking is draining billions from exchanges toward a new corporate elite, CryptoSlate.

• Ethereum Supply Tightens With 45% of ETH Locked: Sygnum, The Defiant.