What is the Ethereum Shanghai upgrade?

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key takeaways

  • Ethereum’s Shanghai Upgrade Scheduled for April 12th
  • For the first time ever, users will be able to unstake their ETH
  • There are currently 17.7 million ETH locked, which is equivalent to 15% of the entire supply.
  • Some users have locked their ETH since December 2020 when it was trading

Ethereum has its next big event called the Shanghai Upgrade. But what exactly is it? And when is it going to happen?

Well, when is the easiest part. After much anticipation, the event is set to take place on Wednesday (April 12).

As it is, the main development is that ETH staked will finally be able to be sold without staking.

Ethereum has been a proof-of-stake blockchain since the merge upgrade went live in September 2022. However, Ethereum at stake is still capped … until now. Once the Shanghai upgrade goes live, users are free to do whatever they want with their ETH.

While the merge only happened seven months ago, stakers have been locking up their ETH in staking contracts for a long time. Staking was actually opened in November 2020, with the merge repeatedly delayed until it finally happened in September.

How much Ethereum will be issued?

Ultimately, the merge went live in September, but the full transition to proof-of-stake was not yet complete. This means that ETH locked up continues to grow and today there is 17.7 million ETH locked up which means 15% Full supply.

It’s been a long wait for some investors. Ethereum was priced below $400 in December 2020, before going bananas in 2021 as crypto booms send prices vertically. It climbed to a high of $4,800, only to fall back below $1,000 as the price declined during the market downturn.

And during this entire time, ETH has just been…there. Locked up and restricted from sale.

Liquid Stacking Derivatives

However, investors had options. Many used liquid staking derivatives, meaning they received tokens in exchange for their staked ETH. They could then trade these tokens, as they would be redeemable for ETH once unlocked, theoretically (and largely in practice as well) traded pretty close to 1:1 with ETH.

So while the previous chart portrays a rollercoaster of emotions as ETH skyrocketed during the pandemic boom before falling back, not all investors were forced to ride that rollercoaster.

Will there be selling pressure on ETH?

The presence of staking derivatives means that the event will be less climactic, at least in terms of selling pressure. However, it is true that selling ETH will still be easy, and there is nothing to say that investors won’t withdraw their ETH once held and sell directly.

Then there’s nothing to say Desire Either be Like many things in the markets, it comes back to the concept of being “priced”. This phenomenon is not surprising, and therefore the pressure is not likely to be overwhelming in either direction.

Of course, a little bit of irrationality isn’t exactly rare in the crypto markets, so there will probably be some movement. But again, this is a move that’s been a long time coming — it formally has a date yet.

the macro will hold the environment key

While the event is important to Ethereum’s fundamentals and long-term future, when specifically looking at price action, the macro remains the most important factor, and it is the reason why the crypto’s price has been on an upward trajectory so far in 2023.

ETH will continue to trade in line with the broader market. This in turn depends to a large extent on the future path of interest rates and the sentiment in the financial markets.

Thus far 2023 has seen a whole lot of volatility in interest rate expectations, with market pricing ending the uber-tight monetary policy that has been in place for much of the past year. This has helped push crypto prices north, with Ethereum gaining 58% this year.

However, it is impossible to forecast the price, especially in the short term. But looking beyond numbers-go-up or numbers-go-down, the Shanghai upgrade represents another important milestone for Ethereum as a network and as a technology, even if selling pressure could affect the price in the short term. Is.

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