Zhuling Chen, CEO of RockX, says staking with Ethereum Shanghai will become increasingly common and can help set benchmark interest rates for blockchain-based money markets. On-chain analytics firms share their forecasts of selling pressure on ETH due to Ethereum Shanghai. Finally, the CEO of Ether Capital explains whether they are still bullish on Ethereum.
Ethereum Shanghai upgrade to be ‘Game Changer’
Zhuling Chen, CEO of blockchain services company RockX, says the Ethereum Shanghai hard fork will change the landscape for Ethereum (ETH) token holders. The growing prevalence of staking, where participants pledge ETH to participate in the functioning of the Blockchain in exchange for returns, could help set benchmark interest rates for Blockchain-based money markets. On Wednesday, Chen said about the Ethereum Shanghai (or Shapella) upgrade:
We think this is actually a game changer. If you think about it, for the first time, Ethereum has a long-term, market risk-free yield curve.
cryptocoin.com As you have reported, the upgrade will take place today, April 12, and will complete the network’s transition to a proof-of-stake (PoS) consensus system. With the upgrade, token holders will be able to withdraw their deposited ETH. The upgrade also aims to improve security, lower fees, and create more room for the network to process more while making it easier to participate in the network’s verification process.
RockX relies on network upgrade!
As concerns persist that the upgrading of Ethereum will cause ETH to pull back significantly, Chen said institutional investors see the event more as a “vote of confidence” in the future of Blockchain. Chen noted that RockX plans to “incentivize some customers to withdraw” some ETH from the 240,000 ETH the company has invested to show its confidence in upgrading the network.
In addition, Chen stated that from a technical standpoint, the upgrade is quite a “boring and peaceful affair.” That said, use cases for decentralized apps or dapps could soon become apparent. In this regard, “We expect a lot of innovative financial products from dapps or the application layer, as well as different kinds of new products,” he said.
Forecasts of selling pressure on ETH due to Ethereum Shanghai
Blockchain analytics firm Glassnode predicts that 170,000 ETH could be sold after the Ethereum Shanghai upgrade. Hal Press, the founder of North Rock Digital, notes that the selling pressure of Ethereum (ETH) will not be as high as predicted after the Shapella upgrade.
Press explains in a tweet on April 12 that current data shows that “most sales forecasts are too high and sales will not be as strong as expected.” According to Press, only 4,000 Ethereum validators voluntarily left the validator pool. 1,600 of that number are individual stakers and they will most likely sell. Based on this, Press says:
Of those 1,600, I would conservatively estimate 50% will sell and 50% will reallocate elsewhere (liquid staking was not available when they started staking). In this case, 800 validators are left with the possibility to sell, which is 25,000 ETH. Plus 50-60 thousand ETH will be withdrawn, that is ~85 thousand ETH in total.
Press states that even though their estimates are three times lower, only 250,000 ETH will be available for sale after unlocking. According to him, this number is rather insignificant given the overall supply. With the Shappella upgrade scheduled for later today, many analysts predicted that the token unlocking could increase the selling pressure on ETH.
Analytical firms anticipate less selling pressure
Blockchain analytics firm Glassnode predicted that 170,000 ETH could be sold after the Shanghai upgrade. The on-chain data aggregator bases its estimation on the number of depositors who want to exit. According to the firm, the impact of any sale on the ETH price will be minimal. This is true even in an extreme situation where the maximum amount of staked ETH and rewards are withdrawn and sold. In this context, Glassnode notes:
Sell-side volume still falls within the average weekly entry volume range. Therefore, we conclude that even the most extreme case will have an acceptable impact on the ETH price.
Meanwhile, Arcana predicts that in the worst-case scenario, only 6% of the average daily trading volume of ETH will be available for sale within the first three days after the withdrawal takes place.
CryptoQuant also believes the selling pressure will be modest. He states that 60% of all staked ETH is at a loss, which means it will not be profitable to sell at this time.
Is Ether Capital still bullish on Ethereum?
In 2021, Ether Capital, a public company in Canada, became the first company to invest $50 million in Ethereum’s Beacon Chain, the proof-of-stake blockchain that supports Ethereum. Since then, the company has doubled its ETH bet. “Is Ether Capital still bullish on Ethereum?” In response to the question, Brian Mosoff, CEO of Ether Capital, said:
When I think of 2022, there were two big events. First, the plunge in asset prices across all Blockchain, as well as the unfortunate outbursts of some of the industry’s most respected players (BlockFi, Three Arrows Capital, FTX), and perhaps a loss of confidence from institutional investors. These were investors who at some point considered establishing a position in the asset class and were finally getting used to the ecosystem. It is something…Overall, we are very bullish, excited for the future, and now that we have liquidity in staked ETH, everything points to an Ethereum future.
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