Binance + Coinbase See Large + Significant ETH Outflows

The two largest centralized crypto exchanges, Binance and Coinbase, have experienced significant outflows of staked ETH as investors move to decentralized alternatives amid regulatory concerns and to chase higher rewards, according to crypto analysts.

Since Ethereum’s Shanghai upgrade on April 12, Coinbase’s staking platform has seen a net outflow of $367 million of staked ETH, while Binance’s staking service has had a net outflow of $340 million. In contrast, decentralized liquid staking protocols like Frax Finance and Rocket Pool have seen net inflows of $56 million and $68 million, respectively.

Liquid staking protocols issue a derivative token that represents the amount of locked tokens and lets investors access decentralized finance (DeFi) services such as lending and borrowing. Since the upgrade, the amount of ETH staked on Frax and Rocket Pool has grown 32.5% and 31% in the past 30 days, respectively. Lido Finance, the largest decentralized liquid staking protocol, with some $11 billion of deposits, has also recorded some $28 million (15,208 ETH) more deposits than withdrawals since April 12.

Regulatory risks and aversion to centralized crypto platforms after last year’s bankruptcies may be some of the reasons that drive investors to decentralized staking protocols.

In addition, decentralized protocols can provide higher staking rewards compared to centralized liquid staking. Currently, Coinbase and Binance offer around 4% annualized reward for staking ETH, whereas decentralized protocols Lido Finance and Frax Finance provide 5% to 7%.

Despite recent outflows, Binance and Coinbase remain among the largest ETH staking providers. However, Binance’s market share fell to 4.5% from 5.7% a month ago, while Coinbase’s share dropped to 12.3% from 13%. According to blockchain intelligence firm Nansen, the two exchanges face further outflows, with Coinbase having some $191 million of staked ETH waiting to be withdrawn, while Binance has $41 million in withdrawal requests in its queue.