Blockchain data shows that since Ethereum’s Shanghai upgrade, the two largest centralized crypto exchanges Binance (and Cobase) have seen large outflows in staked ether.

Dune Analytics dashboard shows that Coinbase’s Staking Platform has seen a $367 Million Net Outflow since April 12 as withdrawals, including full exits and reward withdrawals, outpaced new deposits. Binance’s staking platform, which is the largest crypto exchange in terms of trading volume, had a outflow $340 million.

The decentralized liquid staking protocol has seen a dramatic increase in deposits. Frax Finance, and Rocket Pool are the two largest gainers. They have both recorded net inflows between $56 and $68 millions.

Analysts predicted that the event would be a major milestone for the $225 billion network, likely a href=” will not crash-ether price analysts say/”>boosting/a> staking participation and reshuffling competition between staking services. Analysts predicted the event would be an important milestone for the $225 million network. it will likely boost participation in staking contracts, attract institutional investments and reshuffle the competition among staking services.

Ahmed Ismail said that the upgrade was “a major catalyst” in decentralized liquid staking. He is also the founder and CEO of FLUID Finance.

The liquid staking protocol issues a derivative token which represents the amount locked tokens. This token allows investors to access services like lending and borrowing ( DeFi).

According to DefiLlama , data, the amount staked in Frax and Rocket Pool grew 32.5% and 31.5% respectively over the last 30 days.

Since April 12, Lido Finance has accumulated more deposits (15,208 ETHs) than withdrawals, totaling $28 million.

Higher yields due to regulatory concerns

Tom Wan is an analyst with digital asset investment company 21Shares. He said that regulatory risks and the aversion towards centralized crypto platforms following last year’s bankruptcy are among the factors driving investors to decentralized stake protocols.

The Securities and Exchange Commission charged Kraken with offering unregistered security. The settlement resulted in a surge of liquid staking tokens as the SEC seemed to be targeting staking services providers.

John “Omakase Lo”, head of digital assets for investment firm Recharge Capital said that regulatory pressure on central entities could continue.

He added, “The uncertainty doesn’t help retain deposits.”

Investors may also be attracted by the higher rewards for staking that decentralized protocols offer. Binance and Cobase currently offer a 4% annualized reward when staking Ethereum, while decentralized protocols Lido Financial, and Fraxe Finance, provide 5%-7%.

“Centralized liquid stakes usually have a lower yield profile.” Omakase says that compliance and staffing add up.

Market share of ETH staking protocols (Hildobby.eth/Dune analytics)

Binance and Coinbase are still the two largest ETH staking services despite recent outflows. Binance’s market shares fell from 5.7% to 4.5% a month earlier, and Coinbase’s dropped from 13% to 12.3%.

Data from blockchain intelligence firm Nansen indicates that the two exchanges are facing further outflows. Binance’s queue has 411 million USD worth of withdrawal requests. Coinbase is waiting for $191,000,000 in staked ETH to be withdrawn.

James Rubin is the editor.