4 - 7 minute read
The highly anticipated Shanghai/Capella hard fork is set to take place on April 12, 2023, activating the unlocking of staked Ether. Glassnode, an on-chain intelligence platform, predicts that only 1% of the total 18.1 million ETH staked on the Beacon Chain will be unlocked within the first week of the upgrade. The figure will comprise of 100,000 Ether staking rewards and 70,000 ETH in staked Ether, and a few mechanisms are in place to prevent a flood of Ether supply hitting the market all at once.
According to Glassnode, an estimated 170,000 Ether of the total 18.1 million staked on the Beacon Chain will be unlocked during the first week of the upgrade. The majority of which will either be staking rewards or Ether in staked Ether, which will not impact the price of Ether dramatically. In its April 11 report, Glassnode backed up its prediction by explaining that only 253 depositors are waiting to exit their stake, and only a handful of organizations will withdraw a considerable amount of Ether from crypto exchanges shortly after the upgrade.
The upcoming upgrade is set to move Ethereum one step closer to a fully functional proof-of-stake system, and it is the most anticipated one compared with the other activated EIPs. The unlocking of staked Ether will be enabled by Ethereum Improvement Proposal-4895.
The highly anticipated Shanghai/Capella hard fork is scheduled to take place on 12-April-2023, enabling the withdrawal of staked #Ethereum.
— glassnode (@glassnode) April 11, 2023
In this extended edition of the Week On-Chain, we shall evaluate the overall Ethereum staking landscape, develop a framework to establish… pic.twitter.com/EVgsz3s6GG
Glassnode explained that only a few mechanisms are in place to prevent a flood of Ether supply from hitting the market all at once. Even in the extreme case where the maximum number of rewards and stake are withdrawn and sold, the sell-side volume would still fall within the average weekly exchange inflow volume. The agency concludes that the most extreme cases will have an acceptable impact on the price of ETH. Fidelity Investments also stated that the selling pressure would be muted due to the likelihood of partial withdrawals being re-staked and the length of time withdrawals would take. The withdrawal of large amounts of Ether is not expected to happen soon after the upgrade is activated.
The Shanghai upgrade is set to take effect on April 12, 2023, at 10:30 pm UTC. Traders who have invested in Ethereum should keep a close eye on market trends, but experts suggest that there is likely to be no significant price action. Even if large amounts of Ether are withdrawn from crypto exchanges, a flood of supply hitting the market is unlikely. There may be few opportunities for traders, though traders should not be too concerned as the impact of the upgrade is not expected to disturb the market’s stability.
The Shanghai/Capella hard fork is expected to upgrade Ethereum from a proof-of-work to a proof-of-stake system. Though the unlocking of staked Ether will take place once the upgrade is activated, it is unlikely to cause a sharp decline in the price of Ether. The unlocking of a small amount of Ether compared to its total staked value and the mechanisms in place to prevent a sudden flood of supply onto the market will help stabilize the market. Traders may be able to take advantage of the few opportunities available and look forward to a stable market after the upgrade.
The Bottom Line
Traders have little to worry about when it comes to the price of Ether after the Shanghai/Capella hard fork is activated. Supply flooding the market is unlikely, and measures have been put in place to prevent it from happening. Even if larger amounts of Ether are withdrawn from crypto exchanges, the impact is not expected to be dramatic. Traders should look forward to a more stable market after the upgrade.
