Ethereum validator exit queue reaches highest point ever
The Ethereum validator exit queue reached 744,000 validators as of Saturday, July 26, its highest ever point in history. For context, the exit queue averaged roughly under 1,000 validators per day just two weeks ago. The exit queue spiking was likely caused by a mechanical liquidity shock on Aave’s borrow rates.Over a week ago, roughly 167,000 ETH (worth over $630 million) was withdrawn from the Aave lending pool, driving Aave’s wETH borrow APR from ~3 % to double‑digits. The higher borrowing costs flipped a popular stETH/LRT loop‑leverage trading strategy from positive to negative carry, forcing vaults and whales to repay loans and look for raw ETH.To get ETH, deleveragers redeemed stETH/wstETH and newer LRTs via the validator‑withdrawal path, causing the exit queue to spike. As a result, stETH slipped around 0.3%-0.6 % below par, causing arbitrageurs to buy the discount and join the exit queue to pocket the spread, compounding congestion.More validators queuing led to longer waits, leading to bigger opportunity costs that led to even more stETH selling, causing a reflexive loop. This phenomenon is expected to be temporary with the exit queue to subside as Aave rates normalize, which would cause the stETH discount to close and arbitrage redemptions to clear.Another reason for the spike in validator exits is EigenLayer's reopening of its deposit caps, prompting operators to exit native validators or Lido, with much of this ETH expected to re-enter via restaked validators. This was evident by EigenLayer experiencing net inflows worth ~$940 million on Monday, July 21.This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry's most thought-provoking trends.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.