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 participants in the network to unlock their ETH staked on the Blockchain, which 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 exchange, the decision to move forward with Shanghai, which was overshadowed by bad emotions at the time, was announced in December. At this point, crypto analysts are sharpening their pencils on how ether could trade at Ethereum’s next big milestone. According to cryptokoin.com data, Ethereum has been trading at $1,410, up 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, 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 an important milestone and success for Ethereum,” Coin Metrics wrote in a bulletin note. “But in 2023, Ethereum ecosystem participants will also continue to grapple with the complex dynamics of PoS,” he said.
What are the analysts saying?
Many analysts expressed their thoughts about the upgrade in ETH. Primarily, crypto trader Thomas Kralow expects to see a short-term bearish move for ETH just before and after the upgrade, as “daily liquidity is unable to keep up with the unused supply of ETH.” He also notes that “the fact that April is the tax deadline won’t help either, because there are usually so many sales during the tax period.” He predicted that the potential price drop would be no 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 major scaling upgrade later this year called proto-danksharding, also known as EIP 4844, which will make Ethereum more scalable through sharding. “It goes without saying that such improvements will be incredibly bullish for Ethereum and any short-term selling pressure will either buy in completely 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 want to somehow make money if it succeeds. “For the past five years, almost every investor has tried to find different ways to express this theme,” he says. But, according to Forman, for the first time ever, we are coming out of a bear market that matches the real product market. “If you want to express all these areas of blockchain with a single investment, that would be Ethereum,” he said. Also, “In some ways, ETH is basically a crypto index now.” he added.
Dorman said he would not worry about the potential selling pressure from unlocking the staked ETH after 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 easily be changed by people who do not stake first time because they need liquidity.” said.
Will the amount of staked altcoins change?
Lucas Outumuro, head of research at crypto data and analytics firm IntoTheBlock, wrote in a news release that ETH withdrawals will be processed via a queue that allows a maximum of approximately 43,000 staked ETH per day to be issued. “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 part 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 amount 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 major chains have a staking rate of 46% to 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 trustless protocols should see a growth.
Brent Xu, founder and CEO of Cosmos-based borrowing and lending platform Umee, said he expects “some selling pressure” after the upgrade. Similar to Cosmos, he said Ethereum’s liquid staking derivatives currently face centralization risks, but hopes that after its update, liquid staking derivatives will “significantly reduce” risk.
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