Users will be able to withdraw millions of “staked” Ether, the native money, for prospective sale thanks to an impending update to the Ethereum network. It would generally imply that the token would soon face intense selling pressure, although not everyone agrees with that.
Ethereum Shanghai upgrade
The software network will reportedly be upgraded on Wednesday with new features and enhancements to efficiency, cost, and security by Ethereum developers, the second-largest blockchain in the world with a valuation of US$231 billion.
Nevertheless, the EIP-4895 is the core component of the claimed Shanghai upgrade, which, according to the Ethereum Foundation, will occur at 10:27 p.m. UTC on April 12, 2023. This enables users to get a passive income, often in the form of additional tokens, in exchange for their staked Ether, or tokens placed to support the operations of a blockchain.
There is presently a significant inflow of capital into the Ethereum Beacon Chain, which might result in greater-than-expected selling pressure if the staking unlocks happens. While over time, this scenario is expected to strengthen Ethereum’s standing in the market.
The new Ethereum network’s coordination system, Beacon Chain, ensures the generation and validation of new blocks and rewards validators with ETH for upholding network security. After the impending staking unlocks, owners of Ethereum will be able to take their ETH out of staking contracts, restoring ownership of their previously locked funds.
What effect will the Shanghai upgrade have on the price of ETH?
According to Etherscan, 15% of the entire supply, or around 18 million Ether, was staked into the network. This raised fears that investors could rush to sell their Ether to lock in gains, which would depress prices. Since the start of the year, ether has increased by over 60%.
Data from Etherscan shows that since the Beacon Chain became online in December 2020, more than 18 million ETH (18,096,791) worth $33,590,177,959 have been staked on the network. The whole amount cannot be unstacked immediately after the upgrade, but the 1.1 million coins that were earned as staking rewards may.
Ethereum stakeholders could need to join lines, and the queues they join will depend on where their stakes are kept. Lido, for instance, which now controls about a third of the staked Ether, anticipates opening withdrawals in May.
For ETH holders to withdraw their funds, it may take months since Ethereum has placed restrictions in place to prevent too many people from doing so simultaneously and rendering the system vulnerable to attack.
Additionally, according to Santiment, around 90% of the available ETH is held by its users. Since September 2022, cryptocurrency owners have been progressively moving towards self-custody. The trend increased in November with the demise of the FTX exchange, which resulted in a sharp decline in the availability of ETH on exchanges. Due to the withdrawal of cash, there is less immediate pressure to sell, and it is anticipated that there would be little more selling.