The historic transition of leading altcoin Ethereum (ETH) to the proof-of-stake (PoS) network known as “Merge” last year was one of the biggest stories of the year in crypto markets. All eyes are now on Ethereum’s next major upgrade, which is expected to happen in March. This upgrade is known as the “Shanghai hard fork”, which will allow network participants to unlock their ETH staked on the Blockchain that has been inaccessible for months. Here are the details…
Shanghai upgrade for leading altcoin eagerly awaited
As the crypto industry grappled with the consequences of Sam Bankman-Fried’s epic collapse of the FTX stock market, his decision to move forward with Shanghai, which was overshadowed by the nasty feelings at the time, was announced in December. At this point, crypto analysts are hardening their pencils on how ether could trade at Ethereum’s next big milestone. Ethereum has been trading at $ 1,410 with an increase of 12 percent so far. On the other hand, the liquid staking solution Lido DAO (LDO) for the altcoin has jumped 53% in the last seven days and 92% in the last 30 days.
However, the uncertainty regarding Ethereum’s upgrade is also swirling in the market, with some traders commenting on the current low staking rate of ETH compared to other PoS Blockchains. “Merge was a valuable milestone and achievement for Ethereum,” Coin Metrics wrote in a bulletin note. “But in 2023, Ethereum ecosystem participants will continue to grapple with the complex dynamics of PoS at the same time,” he said.
What are the analysts saying?
Many analysts expressed their opinions about the upgrade in ETH. First of all, crypto trader Thomas Kralow expects to see a short-term bearish move for ETH quickly before and after the upgrade, as “daily liquidity is not keeping up with the unused supply of ETH.” He also states that “the fact that April is the deadline for taxes won’t help either, as there are usually too many sales during the tax period.” He claimed that the potential price drop would not be more than 15%-20% and that ETH should recover quickly.
According to Kralow, if the Shangai upgrade is successful, it will lay the foundation for another valuable scaling upgrade called proto-danksharding, also known as EIP 4844, which will make Ethereum more scalable via sharding later this year. “It goes without saying that such improvements will be incredibly bullish for Ethereum, and any short-term selling pressure will either buy outright or at least partially,” he said.
No need to worry about selling pressure in ETH?
Jeff Dorman, chief investment officer at digital asset management firm Arca, said, “Most investors have now heard of blockchain and would like to make some form of money if the blockchain succeeds. “For the past five years, almost every investor has quickly tried to come up with different ways to talk about this theme,” he says. But according to Forman, for the first time ever, we are coming out of a bear market that is suitable for the real art market. “If you want to term all these areas of blockchain with a single investment, it would be Ethereum,” he said. Also, “ETH by some parties is now basically a crypto index.” he added.
Dorman said he would not worry about the potential selling pressure from unlocking the staked ETH following the upgrade. “There may be a pent-up demand to get liquidity from those who have not had liquidity for the past six months, but this can simply be changed by individuals who do not stake first time because they need liquidity.” said.
Will the staking altcoin size change?
Lucas Outumuro, research lead at crypto data and analytics firm IntoTheBlock, wrote in a news release that ETH withdrawals will be processed via a queue that allows the output of a maximum of approximately 43,000 staked ETH per day. “Based on this, it will take more than a year for the 15.91 million ETH staked to be withdrawn, which will prevent mass withdrawals and reduce selling pressure,” he said. “The fact that people who stake can now withdraw money even if they have to be segments of a queue may encourage more people to stake in return,” he said.
Messari research analyst Kunal Goel wrote in a report that the total metric of ETH staked will likely increase post-Shanghai. Goel noted that Ethereum remains the lowest staking rate compared to other major proof-of-stake chains (Other precious chains have staking rates ranging from 46% to mid-97%). After the upgrade, the 30-50% range of Ethereum’s staking rate “seems reasonable”. He also predicted that Lido and Rocket Pool liquid staking protocols would benefit from the increase in the staking rate of ETH after Shanghai, while decentralized non-trust based protocols should see a growth.
Brent Xu, founder and CEO of Cosmos-based borrowing and lending platform Umee, said he expects “a measure of selling pressure” after the upgrade. Similar to Cosmos, he said that Ethereum’s liquid staking derivatives currently face centralization risks, but hopes that after its update, liquid staking derivatives will “significantly reduce” the risk.