Ethereum successfully completed the Shanghai upgrade on April 13 at 01:27 UTC. Here is what happened in this process and the latest situation in ETH price…
Validators can now withdraw their deposited ETH
cryptocoin.com As we reported, Ethereum’s Shanghai update introduces an important new feature that allows validators who previously staked ETH on-chain to withdraw these tokens for the first time. However, the update will not flood the market with ETH. Because Ethereum will only allow 1,350 full validators to withdraw staking assets every day for the next 18 months. As each validator deposits 32 ETH, no more than 43,200 ETH ($83 million at current prices) can enter the market per day. Also, according to many, it is unlikely that all validators will withdraw their ETH.
According to data from Nansen, 170,689 ETH and 4,799 validators are waiting for full exit. This amount corresponds to approximately 1 percent of the ETH staked. However, more pessimistic forecasts suggest that 1.54 million ETH may be withdrawn shortly after the upgrade due to different partial withdrawal rules. Other estimates suggest that the upgrade resulted in $5 billion in unrealized losses.
Meanwhile, third-party staking platforms are also acting on their own schedules. For example, liquid staking platform Lido suggested that users could start withdrawing funds around May. Shanghai also includes other clauses, such as features to reduce contract size and certain contract risks, and improvements to lower gas fees for developers, while providing a basis for contingent or revocable payments.
Shanghai is just one step on the Ethereum roadmap
Shanghai represents the most significant Ethereum development in months, and the event has been widely watched. While ConsenSys has released commemorative NFTs to commemorate this event, wallet project MetaMask has produced a user guide and warned of scams. Despite expectations, prices fluctuated very little during the event. ETH is up 0.2 percent in price within an hour and has seen slight gains. After the update, at the time of writing, it is trading at $1,917, up 2.7 percent.
Previously, Ethereum had undergone another major upgrade called Merge. This upgrade took place in September 2022 and marked Ethereum’s complete transition from proof-of-work (also known as mining) to proof-of-stake. While Merge represents a complete change in staking, validators were able to deposit their stakes as early as November 2020. The next big Ethereum is called Cancun. It will feature proto-danksharding, a feature that aims to increase scalability by improving fees and transaction times.
What are the analysts saying?
Analysts were divided over potential price action on the way up. While many predicted that the new supply would increase selling pressure, others thought it could become a psychological warfare where traders “punish” excessively short positions. Brent Xu, CEO of cross-chain decentralized finance (DeFi) protocol Umee, wrote that he does not expect a big drop for ETH or related liquid staking derivatives (LST) in the near future. Xu used the following statements:
The momentum is very strong. There are many institutions currently holding ETH and LSTs. Individual users are basically not in the picture, and individuals will be the ones to dispose of at this time. However, institutions will not really be affected by this upgrade because their prospects for the investment process are longer term.
Ethereum founder Vitalik Buterin also made a statement
According to Coin Metrics, alongside Nansen data, around 1.2 million ETH tokens worth over $2.3 billion at current price will be withdrawn in the next five days. Also, a total of $36.7 billion in ETH is locked for staking. During the livestream of the Shanghai upgrade, Ethereum co-founder Vitalik Buterin also made the statement. He said that after the Shanghai update, making transactions cheaper and faster will be the next big challenge for Ethereum developers. Also, Buterin said:
We are at a stage where the hardest and fastest parts of the Ethereum protocol transition are basically over. There are still some very important things to do, but these very important things can be done safely at a slower pace.
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