Hi readers, In today's newsletter, SenseiNode's Pablo LarguÃa says that the rise of staking represents a critical point in Ethereum's development.
Then, Gerry O'Shea of Hashdex writes that the response of bitcoin prices to the destabilizing announcement of U.S. tariffs in April suggests the digital asset may be achieving one of its fundamental promises.
Thanks for joining us. |
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Ether ETFs and Institutional Staking: What's at Stake? |
Institutional funds currently hold about 3.3 million ether (ETH), or roughly 3% of the circulating supply, through exchange-traded funds (ETFs). With 27% of ETH already staked, these ETF holdings alone could increase the amount of total staked ETH by more than 10%. And that's without factoring in additional inflows from investors drawn to the promise of earning staking yield inside an ETF wrapper. The question now therefore isn't can institutions stake: it's when and how they'll do it. That "how" matters, however: if ETH ETF staking is approved, issuers may default to third-party operators or route staking through a handful of custodians. This could result in validator power concentrating quickly, especially considering current custody providers, creating centralized entities. Lido still leads with over 30% of staked ETH, but under the hood there are more than 500 operators with the inception of Community Staking Module last year. But if a wave of institutional ETH money flows into just a few trusted intermediaries, Ethereum risks drifting toward a validator oligopoly on centralized operators. |
This chart shows the total ETH held by ETFs in purple, which would be the second largest staker as a category, and in orange the top three ETFs holding ETH. TVL= total value locked. |
On the flip side, there's a rare opportunity for ETF issuers to go direct, running their own nodes. Vertical integration into staking infrastructure allows issuers to both decentralize the network and unlock economic upside. The standard validator fee — typically 5–15% of staking rewards — is currently captured by operators and the liquid staking protocol managing the staking pools, such as Lido, RocketPool and even the centralized wallet exchanges pools. However, if ETF managers run their own nodes or partner with independent providers, they can reclaim that margin and boost fund performance. In an industry competing on basis points, that edge matters. We're already seeing an M&A trend underway. Bitwise's acquisition of a staking operator is no coincidence: it's a signal that smart asset managers are positioning for a future where staking isn't just a back-end service but a core part of the fund's value chain. This development represents Ethereum's fork in the road, in which institutions can either treat staking as a plug-and-play checkbox, reinforcing centralization and systemic risk, or they can help build a more credibly neutral protocol by distributing operations across validators. With a short queue, an expanding set of validators and billions of ETH sitting idle, the timing couldn't be better. So as the institutionalization of staking looks increasingly likely, let's make sure it's done right, reinforcing the foundations of what blockchain is all about. |
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The Market Reaction to Trump's Tariffs Signals a Broader Acceptance of Bitcoin's 'Digital Gold' Narrative |
In financial markets, making assumptions based on short-term observations is a fool's errand, as significant trends develop over months and years, not days or weeks. But as investors evaluate bitcoin's role in their portfolios, the events of April are worth analyzing in order to understand the asset's emerging reputation as a store of value. Backdrop of volatility The turbulence sparked by President Trump's tariffs announcement on April 2 sent stock prices plummeting the following day, with the Nasdaq 100 and S&P 500 falling 4.8% and 5.4%, respectively. Bitcoin followed suit as the VIX Volatility Index hit levels not seen since the early days of COVID and fears of retaliatory trade measures prevailed. However, bitcoin's price began to recover sharply within days of the announcement, causing its correlation with both the Nasdaq 100 and S&P 500 to fall below 0.50, before those correlations rose again as the April 9 pause on tariffs brought back "risk-on" mode. |
Bitcoin's correlations to traditional markets in April |
Source: Hashdex Research with data from CF Benchmarks and Bloomberg (April 01, 2025 to April 30, 2025). 30-day rolling correlations (considering only workdays) between bitcoin (represented by the Nasdaq Bitcoin Reference Price Index) and TradFi indices. |
Bitcoin vs. traditional assets, 5-year returns |
Source: CaseBitcoin, Return data from May 1, 2020 to April 30, 2025 (CaseBitcoin.com) |
The path to digital gold Maybe more compelling than bitcoin's longer-term returns are the long-term portfolio effects. Even a small allocation to bitcoin within a traditional 60% stock/40% bond portfolio would have improved risk-adjusted returns in 98% of rolling three-year periods over the last decade. And these risk-adjusted returns are markedly higher over longer time frames, suggesting that bitcoin's volatility from positive returns more than counterbalances short-term drawdowns. It might still be premature to claim that bitcoin has been universally accepted as "digital gold," but that narrative, supported by its response to geopolitical events, is gaining momentum. The combination of bitcoin's fixed supply, liquidity, accessibility and immunity to central bank interference gives it properties no traditional asset can replicate. This should be appealing to any investor, large or small, in search of portfolio diversification and long-term wealth preservation. |
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