Ethereum at a Crossroads: Staking ETFs Gain Momentum Amid Network Upgrades

Ethereum CRYPTO000ETH

Ethereum stands at a pivotal juncture. While near-term technical selling pressure weighs on the price, renewed interest from major financial players is putting the cryptocurrency back into the spotlight. Notably, Morgan Stanley’s plan to launch a spot Ethereum ETF that includes a staking component could alter the market’s long-run dynamics. The key will be how this institutional support interacts with the current weakness in prices.

The strongest signal this week is coming from the institutional side. On January 7, Morgan Stanley filed an S-1 with the U.S. Securities and Exchange Commission for a spot Ethereum ETF and takes a step beyond prior products by expressly enabling staking within the fund.

In essence, the structure envisages collecting staking income from the Ethereum network via third-party operators and channeling the PoS yield directly into a regulated product. This aligns with a broader trend in traditional finance: systematically monetizing the ongoing yields generated by proof-of-stake assets.

The filing follows similar moves by other asset managers, hinting at a coordinated effort to weave staking into regulated crypto offerings. If successful, it could reshape how Ethereum is perceived as an income-generating asset.

ETF flows: From sizable inflows to a swift reversal

The market’s mood has been as much about flows as about price moves.

• On Tuesday, January 6, U.S. spot Ethereum ETFs logged robust net inflows of about $114.7 million. It marked the third straight day of positive flows, led by BlackRock’s iShares Ethereum Trust (ETHA), which gathered nearly $198 million.
• By Wednesday, January 7, sentiment flipped to net outflows of roughly $98.6 million, signaling profit-taking. The Grayscale Ethereum Trust (ETHE) accounted for more than $52 million of the outflows, offsetting much of the prior day’s momentum.

This rapid swing from buying to selling mirrors the broader picture: a long-term institutional narrative on one side, with tactical rebalancing and profit protection on the other.

On-chain developments: Scaling upgrades and record activity

Away from daily price moves, the network is advancing structurally.

BPO2 upgrade strengthens Layer-2 capacity

On January 7, Ethereum successfully deployed the second “Blob Parameter Only” fork (BPO2). The upgrade targets higher capacity for Layer-2 rollups by adjusting core parameters:

• Blob-Limit increased from 15 to 21
• Blob-Target increased from 10 to 14

The changes reduce costs and bottlenecks for Layer-2 networks that use Ethereum as the settlement layer, reinforcing Ethereum’s role as the backbone for scalable Web3 applications.

Network usage remains elevated

On-chain activity remains elevated into year-end and early January, with daily transaction volume around 2.23 million—an all-time high. This surge in activity is supported by substantial staking engagement.

For example, BitMine has expanded its Ethereum staking operations and now holds more than 827,000 ETH staked, a position valued at about $2.62 billion. This illustrates that large market participants view Ethereum not merely as a speculative asset but as a steady source of yield.

Market snapshot: profit-taking, whales, and key levels

The price retracement toward the mid-$3,000s has been driven largely by profit-taking and a rebalancing of derivatives positions. The current price sits at $3,111.47, roughly 3% above the 50-day moving average and about one-third below the 52-week high, painting a picture more of consolidation than panic.

Among major addresses, a mixed bag emerges:

• World Liberty Financial recently swapped roughly 770 ETH for Wrapped Bitcoin (WBTC), effectively adding to its holdings.
• At the same time, wallets holding between 100,000 and 1,000,000 ETH sold around $970 million worth of ETH over the week. The resulting supply overhang has so far restrained any meaningful rebounds.

From a chart perspective, attention centers on a key support zone between $3,030 and $3,050. A break below this band could open a path toward $2,800. On the upside, the first meaningful hurdles lie at $3,200 and the psychologically important level of $3,400.

Regulatory sentiment and the road ahead

Regulatory signals are broadly favorable. The political environment in the United States is increasingly viewed as crypto-friendly, which could improve the odds of approving more complex products, such as a spot ETF with a staking component. Morgan Stanley’s initiative may benefit from this backdrop.

In the near term, Ethereum’s trajectory will hinge on the balance between ETF inflows, profit-taking, and derivatives positioning. Mid-term factors include the progression of Morgan Stanley’s staking ETF approval and how ETF flows evolve after the contrasting moves seen on January 6 and January 7. When paired with recent scaling upgrades and sustained network activity, the landscape presents a scenario where technical pullbacks could coincide with a broader institutional build-up.