Shanghai update is coming to Ethereum… What will happen, will it meet expectations?

Cryptocurrency markets have started to enter into an upward movement again with the activity in the global economy. The rise that started with the leading cryptocurrency Bitcoin took place. Bitcoin, which has been trading at the limit of 30 thousand dollars for a long time, has exceeded 30 thousand dollars. In Ethereum, the excitement of the update started. 15 percent of total Ethereums will be unlocked.

There is also an update development in Ethereum, the second strongest cryptocurrency. After the Merge update last September, the Shanghai update will now take place. With the update that will take place tomorrow, 18 million Ethereum will be unlocked. The share of 18 million Ethereum in the total Ethereum is at the level of 15 percent.

Ethereum hit a historic high of $4868 in November 2021. Prior to the update, Ethereum also started to gain value. Ethereum is trading at $117, up 3%. Ethereum, which is trading 61% behind its historical high, has long suffered from the inflation of the dollar and the time value of money. Although Ethereum reaches its historical highs again, it seems that it will not make its investors happy without gaining the benefit of the long-term decline.

32 BILLION DOLLARS OF ETHEREUM UNLOCKED

Bitay Research Department Analyst Alper Samet Yorak commented on the possible effects of the update on Ethereum and the industry.

Cryptocurrency market players have turned their attention back to Ethereum after a few months hiatus. After Merge, an update step that took place in September 2022 and had an impact on the Ethereum price, now comes the Ethereum Shanghai (or Shapella) update. With the update expected to take place on Wednesday, April 12, 2023, more than 18 million Ethereum worth approximately $32 billion will be unlocked after 2 years. More than 18 million Ethereums account for about 15 percent of the total locked Ethereums. This is an important development because Ethereum will allow investors who have staked Ethereum to withdraw their funds for the first time since its staking service began in 2020. A few changes are also planned to the Ethereum software with the Shanghai update step. This update step aims to reduce transaction costs for certain activities.
(Number of locked ETH in Ethereum network)

HOW IS THE ETHEREUM PRICE AFFECTED BY THIS SITUATION? IS THERE A SALES PRESSURE? HOW IS THE ETHEREUM PRICE AFFECTED BY THIS SITUATION? IS THERE A SALES PRESSURE?

Of course, the issue that almost everyone is wondering is will the Ethereum price go up or down with this update? In this regard, the divergence among market participants continues. While some people are worried that a high amount of sales may come after the locks will be opened, on the other hand, the current price of the staked Ethereums is low and there is no serious selling pressure with the expectation that many investors will be able to stake their Ethereums again.

Although there are many up and down comments and expectations on the Ethereum price after the update, it is useful to carefully evaluate the figures and the data we have.

1- First of all, Ethereum is one of the blockchains with the lowest staking rate compared to other networks, as shown in the image below. This is because investors cannot withdraw their previously staked Ethereum. With the Shanghai update on April 12, these will now become drawable. Although this situation firstly brings to mind the possibility of encountering selling pressure, it may increase the staking rate on the Ethereum network in the medium-long term. Thus, the stake rates in the Ethereum network, which is 14%, may rise above 20% or 30% in the future.

2- The Ethereum rate on exchanges is at historically low levels with 10.3%. The emergence of Ethereum from exchanges also reduces the risk of selling pressure.

3- The volatility of Ethereum options has also decreased by 8% in the last 2 weeks. The decrease in the volatility of Ethereum options also indicates that investors perceive less risk and uncertainty on the Ethereum price and have an optimistic view on the price.

4- The validators on the Ethereum network continue to support this upgrade and update step. Indeed, according to Staking Rewards data, the number of validators on the Ethereum network has increased by 3% in the last 30 days. In other words, there is a positive perspective on Ethereum.

5- It is also stated that the majority of Ethereum shareholders are long-term investors and are unlikely to liquidate their assets after the Shanghai update.

6- Investors who want to withdraw and sell the entire staked amount will have to wait between 3 weeks and 4 months. In other words, the locks will be opened gradually in order to militarize the sales pressure and to avoid security problems. In other words, the selling pressure will likely spread over several days, allowing buyers to keep up with the selling pressure.

7- At this stage, the institutions that are thought to trigger the selling pressure the most are the Celcius and Kraken exchanges. It is known that Celcius has about 160 thousand and Kraken has about 1.2 million Ethereum.

8- As stated in the above article, it is estimated that 1.3 million of the 18 million locked ETH will be sold in the first stage. Although this figure, which corresponds to a value of close to $ 2 billion, may seem scary, according to data from CoinGecgo, Ethereum’s daily trading volume is about $ 10 billion. This corresponds to 20% of Ethereum’s average daily trading volume.

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