I'm trying to wrap my head around the implications of locking up much of the supply of ether when proof of stake happens. It seems to me that doing so would decrease the circulating supply and increase the price.
It also seems like it might stabilize the price because staking is, in a way, proving that you will not sell your coins in the near future. By offering an incentive to stake coins, an opportunity cost of keeping coins liquid (not staked) is introduced (i.e. you could be making more eth by staking). I'm thinking this cost might pressure people to stake, therefore reducing liquidity, which might deter reactionary selloffs (due to news stories, currently ongoing selloffs, drop in price of eth, etc.) because much of people's eth is not spendable (it's staked). Data on how much is staked and for how long might also signal the intentions of eth holders, since we can assume that if an owner of some eth were intending on holding for a while (and has confidence in eth holding value), then (s)he would have that eth staked. Knowing people's intentions about spending might increase long-term confidence in the currency if enough is staked and for a long enough amount of time.
On the other hand, a decrease in liquidity might be a bad thing. I've read that in forex trading, lesser liquidity generally corresponds to higher volitility, so even if liquidity is successfully reduced, that might actually increase volatility. It also seems possible that liquidity might not change at all. The decrease in the circulating supply and, consequently, the increase in price per eth might kind of cancel out, bringing us back to square one where the total value of all circulating coins remains about the same, regardless of how many are locked up. So price might not stabilize at all. Hell, just the action of staking and un-staking might vary effective supply enough to increase price volatility.
Is there any truth to this thought about eth prices stabilizing, or does this not make sense at all? I'm throwing around the idea of creating an erc-20-based token contact with some staking mechanism built in, but I'm not really aware of the useful properties that might arise from this mechanism. Obviously, staking an erc-20 token will not secure anything (double spends are already out of the question with an erc20 token), I'm interested in the other properties (stability, price increase, others I haven't thought of). I'm having a hard enough time trying to predict the relationship between percentage of coins staked and price, let alone stability of that price.
Does anybody have any thoughts on this? Please let me know if I can clarify anything!