Ethereum Shanghai Upgrade: What Analysts are Expecting

Ethereum Shanghai upgrade
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As another of Ethereum’s many upgrades occurs today, its Shanghai upgrade (aka Shapella) is set for later today. Here’s what analysts are expecting about the Ethereum Shanghai upgrade. 

Keynotes

  • Following the Ethereum Shanghai upgrade, more than 18 million ETH valued at around $34 billion will be unlocked.
  • Validators will be allowed to withdraw staked ether following today’s upgrade.

Ethereum’s two-year journey to proof of stake will be completed this week with the release of the Shanghai upgrade on April 12. The change will bring several technical enhancements to the network, but most Ethereum traders are only concerned with one thing: staking withdrawals.

With over 18 million ETH worth around $34 billion locked up on the Ethereum network and set to become available to validators, investors are naturally concerned about what this may imply for the price of the second-largest cryptocurrency.

Analysts differ on how much ether (ETH) selling pressure on the Ethereum blockchain’s Shanghai upgrade could cause. Validators will be allowed to withdraw staked ether and prizes locked up with the Shanghai upgrade.

JPMorgan (JPM) says 

Ether will likely face some selling pressure from the upgrade as more than one million ether staking rewards become instantly available this week.”

While the short-term price action may be underwhelming, Nansen’s Thurman feels that Shanghai may provide Ethereum investors reason to be more bullish in the long run.

“It’s gonna take a while for people to really understand what the dynamics are regarding whether or not this is a bullish or bearish action in the short to medium term,” he said. “I will say, though, that on a long enough time horizon, it’s really difficult to come up with a thesis that isn’t wildly bullish.”

Also, analysts led by Nikolaos Panigirtzoglou wrote,

“If you add potential additional selling from staked ether balances that belong to “troubled entities,” then the selling pressure may be larger in the coming weeks.”

Amidst all the speculations if everything goes as planned, Ethereum holders will be able to start submitting withdrawal requests to the network immediately once Shanghai goes live. Although users may not receive funds immediately due to the projected duration of the withdrawal queue.

“With many speculating whether this event will cause a massive sell-off in price, it’s important to realize that the withdrawal queue only allows a limited set of requests per day (115,200),”

Guilhem Chaumont, CEO and co-founder of Flowdesk, said.

“So while there may be sustained downward pressure on the price, unstaking is not likely to cause a sharp, sudden dip.”

Validators who stake at least 32 ETH (roughly $60,000 at today’s rates) can expect to wait at least two to three days for withdrawal requests to be fulfilled, according to Ethereum developers.

Those staking through pools and other service providers such as Lido and crypto exchanges like Coinbase may have to wait many weeks or even months to withdraw their funds.

Aside from the wait times, others point out that the presence of liquid staking platforms like Lido implies that traders who wished to trade staked ETH could do so even before Shanghai.

Matthew Niemerg, the co-founder of privacy-enhancing blockchain network Aleph Zero, said,

“It is entirely possible that there will be more people willing to stake ETH (locking up liquidity and reducing the available supply) after the upgrade, as people will be more certain that they can safely unstake their ETH,” said Niemerg.

According to analysts David Duong and Brian Cubellis,

“ETH performance around the Shanghai Fork will be less dependent on technicals and more contingent on what “risk” is doing at the time. If the market sees risk assets selling off, investors may decide to unstake and sell ether just to de-risk, while institutions may not step in as aggressively on the buy side.”

Featured image: Shutterstock


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