What It Means for Ethereum Investors

The Shanghai upgrade is here!

Ethereum’s highly-anticipated hardfork set to implement several Ethereum Improvement Proposals (EIPs) is a critical step between the Merge and Surge phases in Ethereum’s scaling roadmap.

The Shanghai upgrade will allow stakers to unlock their staked ETH. However, there are concerns among some investors about a possible sell-off in ETH when the upgrade occurs.

The transition from Proof-of-Work to Proof-of-Stake through the critical update “The Merge” has caused concern about the potential issues arising from the long-awaited change.

With approximately 18 million Ethereum (valued at roughly $34 billion) staked on the network, equivalent to about 15% of the total supply, some are worried that holders may sell their Ethereum to take profits, leading to a drop in ETH price.

A Staker’s Paradise

Of the over 18 million ETH staked, about 5.67 million are staked on Lido’s LSD platform. According to Nansen statistics, Lido, Coinbase, Kraken, and Binance are the four largest Ethereum validators, accounting for nearly 60% of the total amount of ETH staked.

However, a February report by on-chain provider CryptoQuant suggests that there will not be a massive Ethereum sell-off. Most of the ETH staked is in losses, given the price of ETH was over $4,500 in October last year.

To wit,

“Typically, selling pressure arises when participants have extreme profits, which is not the case for staked ETH currently. Additionally, the most profitable staked ETH was staked less than a year ago and has not seen significant profit-taking events in the past.”

While there are valid concerns about the impact of the Shanghai upgrade and the Merge on the ETH market, many reports suggest that a massive sell-off is unlikely.

It’s noteworthy that there will be a withdrawal limit. The currently locked Ethereum cannot be withdrawn simultaneously, and it may take up to a year to withdraw the total amount of staked Ethereum.

It All Went Fine

The upgrade is scheduled for April 12 – it’s also CPI day. The market is anticipating that the US Federal Reserve (Fed) will keep the 0.25-point interest rate, which may lead to more optimism and a potential opportunity for the ETH price to rise.

In addition, the successful upgrade will encourage investors to participate in ETH staking, particularly with the rise of Liquid Staking platforms.

Ethereum has a low stake ratio compared to other major blockchains. This leaves room for more staking and buying opportunities.

However, the Ethereum Shanghai event is not without risk, as the financial and cryptocurrency markets continue to experience a prolonged downtrend.

While the Fed may still be lenient on rate hikes, high-interest rates could cause capital pressure on companies and investors, potentially negatively impacting the ETH price instead of increasing staking positions.

Post-Shanghai

One of the key indicators of Ethereum’s potential for growth is the decrease in daily Net ETH Issuance and the surge in network activity. This indicates that deflation is much more likely on Ethereum as users engage in trading and other DeFi activities.

This trend is expected to continue, with more users and developers flocking to the platform as its capabilities expand and mature.

Ethereum’s roadmap after the Shanghai upgrade includes the Verge, which will introduce Verkle trees to increase scalability. This upgrade will allow the platform to handle more transactions per second, crucial for its continued growth and success.

In addition, there are plans to tackle other issues, such as statelessness and data sharding, which will further improve Ethereum’s scalability and functionality.

Data sharding is another key feature expected to improve Ethereum’s scalability. This technology will enable the platform to process transactions more efficiently by partitioning the data into smaller subsets, which can then be processed in parallel.

It will allow Ethereum to handle a much larger number of transactions per second without compromising security or decentralization.