Will Ethereum Shanghai Upgrade on 14th March Cause Whales To Sell off?
The Ethereum Shanghai Upgrade is scheduled to be tested on the Goerli test network which is dated March 14, 2023. This upgrade is highly anticipated as it will enable withdrawals of staked ether (ETH) from the network. Goerli is the largest and final public testnet to mimic withdrawals for staked Ether before the upgrade goes live on ETH’s mainnet. Ethereum developers have agreed to test the Shanghai or Shapella update on the Goerli testnet on March 14, marking a significant step towards the final launch of the upgrade on the mainnet.
Will the price of ETH dump after the Shanghai Upgrade?
According to CryptoQuant,
- As Ethereum transitioned from a Proof-of-Work consensus mechanism to Proof-of-Stake (PoS), ETH holders needed to stake their ETH in order to become block producers/validators.
- As of now, 17.3 million ETH, or around 13% of the total supply have been staked.
- These ETH can not be withdrawn once staked, removing it from the supply available to the market.
- However, starting in March 2023 the Ethereum network will activate the Shanghai Fork, which will allow for the staked ETH to be withdrawn.
- As withdrawals are activated, market participants have been wondering if these staked ETH will flood the market and cause selling pressure.
- Technically speaking, the deposited Ethereum can not be withdrawn simultaneously, and it may take up to a year to withdraw the total value staked.
- 60% of the total ETH staked is currently at a loss. This represents 10.3 million ETH out of a total of 17.2 million ETH that has been staked so far.
- Most of the staked ETH in the loss was staked between March 2021 and June 2022.
- The staked ETH in loss has had a return as low as -65% or $3,000 since it was staked.
- Meanwhile, 6.9 million ETH, or 40% of the total ETH staked are currently in profit, but most of it is only up between 20-30%.
It’s difficult to predict the future price movements of Ethereum after the Shanghai upgrade as there are many factors that can affect the price, including market sentiment, adoption rates, and competition. However, it’s worth noting that upgrades and improvements to the Ethereum network are generally seen as positive developments by the community and can lead to increased adoption and usage of the network, which could potentially lead to higher prices. That being said, it’s important to remember that cryptocurrency prices are notoriously volatile and subject to fluctuations, so it’s always a good idea to exercise caution and do your own research before making any investment decisions.
According to several analysts, the Ethereum Shanghai upgrade, which will allow withdrawals for some $29 billion of staked ether (ETH) previously locked starting next month, is unlikely to cause major selling pressure and crash the price of ETH. Instead, they believe that the upgrade is generally viewed as a positive development that could potentially lead to increased adoption and usage of the network, which could potentially lead to higher prices.
While there are concerns about a supply overhang, analysts from Bernstein believe that the impact on the ether supply from the Shanghai upgrade is limited and that the price action of ETH is expected to be cautious until the upgrade is implemented later this month.
As the Shanghai upgrade nears, speculations on the next Ethereum move are expected to heighten its volatility. However, some crypto traders believe that the Shanghai upgrade won’t crash the Ethereum price and that it could even lead to increased demand for the cryptocurrency.
It’s important to note that cryptocurrency prices are notoriously volatile and subject to fluctuations, so it’s always a good idea to exercise caution and do your own research before making any investment decisions.
Now let us discuss how the upcoming Ethereum network upgrade, dubbed the “Shanghai” upgrade, could potentially impact the price of ETH/USD. It provides an overview of the changes that the upgrade is expected to bring to the Ethereum network, such as improving network efficiency, reducing transaction fees, and increasing the number of transactions per second. The article also highlights the potential selling pressure that could occur after the upgrade due to miners selling their ETH rewards to cover the costs of upgrading their mining rigs. Finally, the author provides their technical analysis of the ETH/USD chart, highlighting key support and resistance levels to watch for in the near term.
Shanghai upgrade, also known as the Ethereum Improvement Proposal (EIP) 1559, aims to address issues of transaction fees, network congestion, and overall user experience on the Ethereum network. One of the significant changes introduced by EIP 1559 is the implementation of a new fee structure, which includes a base fee and a priority fee. This fee structure is expected to reduce network congestion and provide more predictable transaction fees for users.
However, the article notes that there is a potential downside to the EIP 1559 upgrade, which could lead to an increase in selling pressure on the Ethereum network. This is because the new fee structure includes a mechanism that burns a portion of the base fee, effectively reducing the overall supply of Ethereum over time. This reduction in supply could create selling pressure as users look to cash out their Ethereum holdings.
The article provides a chart showing that the selling pressure has indeed increased after the EIP 1559 upgrade was implemented. However, the author notes that it is difficult to determine whether the selling pressure is a direct result of the upgrade or simply part of the normal market cycle.
