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1. Institutional crypto staking rises as yields fall
Institutional crypto staking is expanding even as the rewards on offer shrink. In the third quarter, Ethereum and Solana both attracted more staked tokens while their gross annualized yields declined, according to research from asset manager Bitwise. Easier access through custodians, exchange-traded products and treasury companies is drawing in capital, while falling rewards and slow withdrawals test the economics.
Kam Benbrik, head of onchain research at Bitwise, says Ethereum now has more stake securing it than at any point in its history: 43.8 million ETH, or 35.9% of the total supply. On Solana, active stake rose to 440.5 million SOL, based on Bitwise's staking report. On both networks, though, the gross yield paid to stakers fell.
That combination raises several questions. Why are investors committing more tokens for smaller returns, what do they actually take home after fees, and can growing network activity eventually make up for the lower rewards that come from new token issuance? Market participants interviewed for the report offer a range of answers.
The findings matter for anyone weighing crypto as an income-bearing asset. Staking is often compared with interest on a savings product, but the comparison is imperfect: the reward is paid in the network's own token, its size changes with participation and activity, and the principal remains exposed to the price of that token. A falling yield therefore says nothing about whether the underlying asset is rising or falling in value.
2. What is crypto staking and why does demand rise in weak markets?
Staking means committing tokens to help validate transactions and secure a blockchain, in return for rewards paid by the network. For people who already hold a token, it is a way to grow their balance without selling anything.
John Zettler, senior director of product at Payward Services, the business-to-business arm of Kraken's parent company Payward, describes staking as countercyclical. When markets are weak, more holders adopt a buy-and-hold stance, so more tokens are staked and the reward is spread across a larger pool, pushing yields lower.
Bull markets reverse those forces, Zettler says. Higher transaction fees lift the rewards paid to validators, while a stronger preference for liquidity can reduce participation and lift yields. The pattern means that headline yields move with market sentiment as well as with the rules written into each protocol.
This is also why yield figures should be read as gross, annualized averages for a quarter rather than as fixed rates. They describe what the network paid across all stakers in a period, not what a particular investor will receive after provider charges and timing differences.
3. Why is access driving institutional adoption?
Beyond market cycles, staking is turning into a standard part of holding crypto. A Coinbase spokesperson credits staking exchange-traded funds and digital asset treasury companies with broadening access, and argues that retail and institutional investors are increasingly staking for long-term benefits instead of reacting to short-term price swings.
Zettler says clients generally stake assets they already hold with a provider. Decisions about which assets to buy and where to keep them come first, and staking follows once the assets are in place on a platform. Ethereum's years of operating history have also helped build acceptance among cautious investors.
Kean Gilbert, head of institutional relations at the Lido Ecosystem Foundation, says conversations with institutions have shifted toward implementation. The questions now concern how diverse the validator set is, who audits the code, and what share of a fund is actually staked. Lido is a liquid staking protocol: users stake ether and receive stETH, a tradable token that represents the staked assets and the rewards they accrue.
Gilbert says custodians opened the door. Once they began supporting staking, institutions could take part through relationships they already had, without setting up new infrastructure of their own.
The role of intermediaries is central to this shift. Custodians, funds and treasury companies hold tokens on behalf of clients who may never operate a validator themselves, so adoption depends heavily on whether those intermediaries make staking an easy option to switch on. As more of them do, staking looks less like a specialist activity and more like a default setting for long-term holders.
4. How much are stakers earning as more capital arrives?
Ethereum recorded net staking inflows of 1.99 million ETH in the third quarter, its sixth consecutive quarter of positive inflows. Bitwise attributes the trend to institutional participation, including a growing position at the treasury company Bitmine.
More participation means lower returns, because rewards are divided among a larger pool of staked capital. Ethereum's gross annualized staking yield averaged 2.63% in the third quarter, down from 2.81% in the second. New issuance supplied 2.53 percentage points of that, or 96.3%, and priority fees and transaction-ordering payments made up the rest.
The two sources of reward behave differently. Fees come from users paying to transact, while issuance creates new tokens that dilute holders unless they are offset by burning. A yield dominated by issuance therefore depends less on how busy the network is.
Activity has grown, but fee revenue has not followed. Ethereum processed 199.3 million transactions in the third quarter, up 35.3% from a year earlier, yet network fees and transaction-ordering revenue averaged 198 ETH per day, down 40.2% from the second quarter. Expanded capacity lowered costs for users without yet producing stronger fee income.
The numbers illustrate a basic trade-off in proof-of-stake design. A network that wants strong security encourages as many tokens as possible to be staked, but each additional token staked reduces what every existing staker earns unless total rewards rise at the same pace. Ethereum's reward is currently overwhelmingly issuance, so it adjusts mainly to the amount of stake rather than to usage.
5. What happened to yields on Solana?
Solana's gross staking yield fell to about 6% in the third quarter from 6.38% in the second, even though activity and fees on the network rose. Lower issuance and a larger stake base outweighed the other gains. Nearly 90% of Solana's gross yield still comes from issuance, Bitwise reports.
Clients receive less than the gross figures because providers take a share. Zettler says Payward keeps a small portion of rewards to cover operating and infrastructure costs, though he did not give a figure.
Looking ahead, Zettler expects Ethereum yields to keep compressing as more ETH is staked, eventually settling at an equilibrium determined by the protocol's reward structure. Coinbase declined to forecast yields over the next two years, citing differences between protocols and shifting network activity.
Solana shows the same dynamic with different numbers. Its yield is higher in absolute terms than Ethereum's, yet it too slipped as stake grew, and its dependence on issuance is similarly heavy. For investors comparing the two networks, the gap in gross yield is only part of the picture, since provider charges and liquidity terms also differ.
6. How do institutions manage the liquidity gap?
For institutions, access to assets can matter as much as the yield itself. Gilbert notes that funds must pay out redeeming investors within a day or two, while unstaking ETH can take weeks. Staking funds therefore usually keep part of their holdings liquid. He estimates that the average European staking product is only 50% to 60% staked.
Zettler says long exit queues discourage participation, particularly among investors who might need cash. In a sell-off, demand to exit can stretch withdrawal times further. Payward is developing ways to give clients with staked funds instant liquidity.
Coinbase calls withdrawal delays a routine part of institutional liquidity planning, and points to tools such as financing, liquid staking tokens and trading in staked vaults. Gilbert cites WisdomTree's Physical Lido Staked Ether exchange-traded product, which holds stETH so that it stays fully staked and uses the token's tradability to meet redemptions. Selling a liquid staking token avoids waiting for ETH to unstake, although the option depends on market liquidity and price.
The mismatch between daily redemption rights and multi-week unstaking periods is the practical reason most funds hold back part of their portfolio. Keeping a share of assets unstaked reduces the yield a fund can earn, but it lowers the chance of being unable to meet withdrawals in a stressed market, which institutional investors treat as the more important risk.
7. Why are staking operators under pressure?
Falling rewards also affect the businesses that run blockchain infrastructure. Solana's active validator count dropped to 659 in the third quarter from 696, based on Bitwise's count of validators that produced at least one block during the sampled period.
The Bitwise report says larger operators can add income from selling transaction data and capturing more valuable transactions. Those advantages make it hard for smaller rivals to match the low commissions that bigger operators can charge.
Ethereum's falling validator count needs a different reading. An upgrade allows operators to consolidate validators into larger balances, so fewer validators does not necessarily mean fewer independent operators.
The pressure on small operators has implications for decentralization, one of the properties that staking is meant to protect. If lower yields push smaller validators out, the work of securing a network may concentrate among fewer, larger firms, which is why institutions now ask about validator diversity before committing capital.
8. What comes next for staking?
Improved access and better liquidity tools could keep drawing participants despite lower rewards. Gilbert expects staking to become routine for ETH holders and predicts that within about five years, holding unstaked ETH will seem odd.
The main variables to watch are whether network fees recover enough to supplement issuance, how exit queues behave in the next sell-off, and whether smaller validators can remain competitive as larger operators gain scale.