Coinbase says that the latest decision by the US regulator SEC on staking-focused altcoin projects will have a direct impact on Ethereum (ETH). It’s unclear whether the upcoming Shanghai upgrade will be a catalyst for selling pressure, according to the report.
Coinbase shares concerns about Shanghai rise
According to a Coinbase research report released Tuesday, Kraken’s decision to close staking pools as part of a deal with the SEC has increased uncertainty about the supply dynamics of Ethereum’s next upgrade, the Shanghai Fork, Coinbase (COIN) and Ethereum (ETH). The report noted that the amount of potential selling pressure around Ethereum’s planned upgrade was complicated by the Kraken lawsuit. As Kriptokoin.com, we have included the details of the Kraken and SEC case in this article.
Shanghai to release 1.145 million ETH
Coinbase states that Kraken’s staking pool on Ethereum accounts for around 7% of the total staked supply of ETH, but not all of these assets will come from US customers. “The staking by Kraken could potentially result in a minimum of 350,000 to a maximum of 1,145 million additional ETH circulating in the market once staked ETH withdrawals are activated in the Shanghai Fork,” wrote David Duong, head of institutional research. Shanghai Fork will allow for the first withdrawal of staked and currently locked Ethereums.
In March this changes, and it will have huge impact on Ethereum.
The Shanghai/Capella fork will likely go live next month, and one of the things it does is enable withdrawals from the Beacon Chain. That staked ETH that's been collecting interest will finally be available.
— Jack Niewold 🫡 (@JackNiewold) January 26, 2023
The report did not provide a clear conclusion on whether the released Ethereums would be a catalyst for selling pressure. In December, it was stated that investors were worried that the upgrade “represents the risk of a significant downward event,” but that view has changed as crypto market sentiment evolves.
Ethereum has mechanisms to mitigate sales
The note said that while the regulatory environment overshadows the outlook, selling pressure should be fairly limited because there are mitigating factors and “self-correcting mechanisms” that should help control the flow of ETH in the open market.
ETH performance around Shanghai will depend more on “what the risk is doing when withdrawals are activated”. If the macro environment worsens and equity markets are weak in March, investors may decide to buy and sell Ether back to reduce risk, while institutions may not take action as aggressively as buyers, the report said. Conversely, if risk sentiment is positive at the time, Coinbase says it will expect demand to more than offset the amount of ETH unlocked on the open market.
Meanwhile, banking giant JPMorgan said in a research report on Wednesday that Ethereum’s Shanghai upgrade, scheduled for mid-March, will increase its staking rate in the medium term. As Kriptokoin.com, we have included the details of the report in this article.
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