Ethereum Staking Withdraws Over 2 Billion USD - Liquidity Test

1. Yesterday's Adjustment Phase Developments

- As of the morning of July 24, 2025, the Ethereum ecosystem is witnessing a liquidity panic

- Validators are withdrawing from the Ethereum staking system, with the waiting list to withdraw ETH from validators exceeding 625,000 ETH, equivalent to 2.3 billion USD

- The unstake waiting time extends to 18–23 days

- WETH borrowing interest on Aave skyrocketed above 10%, due to a large amount of ETH being withdrawn

=> This is the most significant volatility since the Terra-Luna collapse in 2022, creating a ripple effect throughout the entire DeFi ecosystem.

2. Causes

- The source of the volatility stems from an action by Justin Sun, who reportedly withdrew 1.7 billion USD in ETH from Aave, while Abraxas Capital also withdrew 115 million USD, creating a ripple effect,...

- This caused borrowing interest rates to spike and triggered a contagion effect

$stETH slightly lost its peg ~0.3% (due to a sell-off)

- Leveraged stETH/ETH positions (popular in DeFi) were liquidated en masse

=> Widespread panic sentiment led to a continued rise in unstake flows

3. Consequences for the market

- The massive withdrawal chain from Aave faces pressure from a multitude of investors withdrawing ETH from staking contracts

- This event raises questions about the sustainability of DeFi in the face of concentrated actions from “whales” like Justin Sun, or the delays from Oracles leading to price discrepancies, and the increase in waiting times causing delays in staking withdrawals

- However, on the other hand, it also creates some positive signals, as there is still consistent buying from large institutions, demonstrating that the demand for $ETH is not solely within DeFi. Additionally, some validators are withdrawing and participating in restaking activities on Eigen Layer and other LRTs, rather than exiting entirely.