The month of June 2022 marked a pivotal moment for the crypto staking landscape, as a sharp market downturn forced institutional investors to revisit their once-bullish staking strategies. With the total crypto market capitalization dropping below $1 trillion for the first time in over a year and the collapse of Terra (LUNA) still reverberating through the industry, the concept of “passive income through staking” faced its toughest stress test yet.

Institutions Hit Pause on Aggressive Staking

Institutional interest in staking surged throughout 2021 and early 2022, driven by attractive annual percentage yields (APYs) from networks like Ethereum 2.0, Solana, and Avalanche. However, the sudden market downturn in Q2 2022, amplified by macroeconomic headwinds and rising interest rates, forced a reality check.

Large asset managers began pulling back from high-risk staking assets, prioritizing capital preservation over yield generation. Some transitioned to liquid staking solutions like Lido and Rocket Pool, which allow for easier asset mobility during volatility.

“The market downturn in June acted as a sobering reminder that staking isn’t risk-free,” said Anya Patel, a digital asset strategist at NovaBridge Capital. “Slashing, token devaluation, and lock-up risks are now part of every institutional discussion.”

Shift Toward Ethereum and Multi-Chain Diversification

The Ethereum Beacon Chain remained the most trusted staking protocol among institutions, with over 10 million ETH staked as of June 2022. Ethereum’s planned Merge upgrade, despite delays, helped maintain confidence due to its strong developer base and transparent roadmap.

At the same time, institutions diversified across multi-chain staking portfolios to mitigate systemic risks. Solana (SOL), Polkadot (DOT), and Cosmos (ATOM) attracted cautious inflows due to their network maturity and governance transparency.

Rise of Custodial Staking and Insurance Products

With market confidence shaken, regulated custodians and staking insurance products gained prominence. Providers such as Coinbase Institutional, Anchorage Digital, and BitGo reported increased onboarding of clients seeking secure, compliant staking solutions.

Key features attracting institutional investors in June 2022 included:

• Slashing protection

• Validator monitoring and reporting

• Audit-compliant smart contracts

• Liquidity options through derivatives

Liquid Staking TVL Grows Despite Market Fall

Interestingly, liquid staking solutions experienced a 25% surge in TVL in June, according to OnStaking analytics. As volatility increased, the ability to unstake or trade staking derivatives became critical. Liquid staking tokens (LSTs) like stETH and mSOL gained traction among hedge funds and crypto-native VCs.

These LSTs were also adopted by DeFi protocols as collateral, further increasing their utility and market penetration.

Strategic Outlook Post-June

The consensus among institutional players post-June was clear: staking is still viable, but it must be data-driven, risk-managed, and portfolio-integrated.

“We’re not abandoning staking,” said Leo Harkness, Managing Partner at EastBridge Digital. “Instead, we’re evolving our strategy to be more responsive to market conditions. We now look at validator performance, slashing history, and governance participation before allocating.”

Summary

June 2022 was a defining month for staking in the institutional space. It separated hype from fundamentals and ushered in a new era of conservative, informed, and diversified staking strategies.