key takeaways
- 15% of ETH supply was locked until the Shanghai upgrade was completed on Thursday
- Although there was no additional selling pressure, ETH is leading the crypto market, up 4.6% today.
- ETH has crossed the $2,000 barrier for the first time since May 2022
Ethereum stackers woke up this morning for the first time in a long, long time… with the ability to sell their ETH,
The Shanghai upgrade is complete, meaning that all staked Ether – some of which has been staking since 2020, when ETH was below $400 per coin – is now available for sale.
A common discourse in the run-up to the event was whether increased selling pressure would flood the market. I analyzed it myself last monthWith the market discussing for a long time what the unprecedented event would do.
But in about 16 hours – the upgrade was completed at 22:42 UTC time on Thursday – ETH has responded strongly, not only resisting the downward pressure, but also leading the crypto market by 4.6% since the upgrade.
Nothing spectacular, but on what is a pretty flat day for the market across the board, the 4.6% jump since the upgrade is interesting.
Of course, not all ether was completely turned off. Liquid staking derivatives were widely available, allowing stakers to receive tokens in exchange for their staked ETH, which could then be traded as proxies, providing them with liquidity – with the promise that an upgrade Derivative tokens can be redeemed 1:1 once they go live.
This fact, in addition to the fact that the price of the upgrade has long been fixed, combined to ultimately ease any downward pressure on price.
How much ether was in the staking contract?
Nonetheless, having perfect liquidity again makes a difference, and the market was mulling over what this could do for price. As soon as the upgrade went live, 18.2 million ETH was locked up – a huge chunk whether in the price or not.
Compared to the total supply, this means that over 15% of the supply was locked up… and then suddenly became available for direct sale.
The hold period here is particularly interesting. Early stakers liquidated their ETH in late 2020 when ETH was trading below $400. He then saw it rise to near $5,000 per coin before falling below $1,000. And in the meantime it remained locked.
It has been a rollercoaster ride with many ups and downs in between. However, many argued that those early bets were for technology, with little interest in price. Then again, we are all human at the end of the day, aren’t we?
Ether Breaks $2,000
Not only have fears of selling pressure proved unfounded for now – although that may yet change – but Ethereum broke the $2,000 mark for the first time since May 2022. This was the month the crypto industry was thrown into the lurch, as LUNA’s death spiral towards the void took a huge chunk of the ecosystem with it.
It is hardly possible to say that Shanghai’s upgrade has come at a good time. If the upgrade had gone live last year, as panic and fear peaked and prices were falling across the board, it might have been a different story.
Can you imagine 15% of ETH supply suddenly going live a week after FTX collapse?
Instead, the upgrade came amid a boom period for crypto as a whole. Bitcoin is now above $30,000 for the first time since last June, up 83% this year. Ether itself has given inventors 66% year-to-date returns.
Obviously, these gains came from levels that were eroded, and Ethereum remains down 60% from its all-time high of November 2021, when it reached $4,891, running out of steam before hitting the $5,000 barrier.
It may take a while for ETH to get back out there – if it ever does, who’s to say in the crypto market? – But regardless of the price impact, the Shanghai upgrade is an important step for the overall ecosystem.
It was delayed several times – originally it was meant to be part of the merge, formerly known as ETH 2.0, which was pushed out several times. But now it’s in the rearview window, and ETH can continue to grow. Fundamentally, the upgrade has been successful, just like the merge last September.
Crypto prices depend on much more than this, though – and there are Distant While the science – and the macro environment – remains challenging, even though interest rate hikes may be coming to an end, the overall picture is brighter than it was a few months ago.
It’s still a tough time. But, at least for today, ETH investors have reason to smile.