Cryptocurrency analysts interviewed say that concerns about Ethereum are exaggerated and selling pressure will be limited.
Ethereum selling pressure and price balance
Crypto analysts say that Ethereum’s Shanghai upgrade, which will allow withdrawals of approximately $29 billion in staked Ether (ETH), which was previously locked, from next month is unlikely to cause major selling pressure and lower the price of ETH.
Analysts say investors’ fear that the increase will flood the market with ETH and cause prices to drop is unfounded. They say the volume of ETH outflows will be less important than many observers predict.
Crypto markets are eagerly awaiting the Shanghai tech upgrade, the next big development scheduled for April since last year’s Unification. It will allow investors to unlock and withdraw ETH for the first time since December 2020, when staking started on Ethereum’s proof-of-stake Beacon Chain.
As research firm Bernstein and others recently noted, many crypto investors are worried that the event could potentially create a significant bulge for the price of ETH, which is currently trading at $1,645. They think that long-term stakers can choose to open a large portion of the 17.5 million ETH worth $28.8 billion in staking contracts and release them for profit.
Ethereum impact won’t be immediate
Still, Arca’s Hotz said that the impact of ETH exits won’t be immediate because withdrawals will supposedly have to endure a queue. “This means that only 10% of the total staked ETH can be removed from the pool within a month,” he said. cryptocoin.com According to data, ETH is trading at $ 1569, down 4.5% in the last 24 hours.
John ‘Omakase’ Lo, head of cryptocurrencies at investment firm Recharge Capital, said that people will not be in a rush to exit staking as they will need time to understand how Shanghai works. “There will also be a period when investors will digest how withdrawals work,” he said.
Rich Falk-Wallace, CEO of institutional crypto data platform Arcana, said that the main driver of ETH price action will be the narrative the market creates about the long-term outlook based on short-term behavior.
Limited sales edition
Falk-Wallace said that many market watchers do not appreciate how severely Ethereum’s withdrawal system limits the amount of ETH withdrawn at one time.
Ethereum’s Shanghai upgrade will set up a two-tier withdrawal system. Partial withdrawals above 32 ETH are usually immediate, but initially Arcana expects them to be distributed within three days due to the queue. Full withdrawals with the minimum staking amount of 32 ETH will take more time and will be released gradually.
According to Arcana’s analysis, there is $1.2 billion in ETH in the partial withdrawal bucket, implying that in the worst-case scenario, only 6% of the average daily ETH trading volume could be released in each of the first three days after withdrawals are allowed. Thereafter, the maximum daily amount of ETH potentially dumped into the market will fall below 1% of daily trading volume over the next six months.
In a report released Thursday, crypto research firm CryptoQuant forecasts moderate selling pressure for ETH from staking withdrawals. According to the report, around 60% of all staked ETH is currently lost at current prices relative to the price each token was staked at the time it was staked.
Liquid staking derivatives
The emergence of liquid staking derivatives (LSD), which allows ETH shareholders to keep their investments liquid and trade by issuing derivative tokens such as stETH, will also reduce outflows. Hotz said that most investors stake ETH using liquid staking platforms like Lido or Coinbase. Thus, they do not need to withdraw and sell to gain liquidity.
According to data from StakingRewards, the staking rate on the Ethereum blockchain is currently very high compared to figures for other chains, including Polkadot’s 48%, Cardano’s and Solana’s 71%, or Polygon’s 38%. less than.
Arcana’s Falk-Wallace thinks Ethereum’s staking rate will converge on other proof-of-stake blockchains after Shanghai as new stakers outpace those who go online and withdraw funds.
Contact us to be instantly informed about the last minute developments. twitter‘in, Facebookin and InstagramFollow and Telegram And YouTube join our channel!
Risk Disclosure: The articles and articles on Kriptokoin.com do not constitute investment advice. Bitcoin and cryptocurrencies are high-risk assets, and you should do your due diligence and do your own research before investing in these currencies. You can lose some or all of your money by investing in Bitcoin and cryptocurrencies. Remember that your transfers and transactions are at your own risk and any losses that may occur are your responsibility. Cryptokoin.com does not recommend buying or selling any cryptocurrencies or digital assets, nor is Kriptokoin.com an investment advisor. For this reason, Kriptokoin.com and the authors of the articles on the site cannot be held responsible for your investment decisions. Readers should do their own research before taking any action regarding the company, assets or services in this article.
Disclaimer: Advertisements on Kriptokoin.com are carried out through third-party advertising channels. In addition, Kriptokoin.com also includes sponsored articles and press releases on its site. For this reason, advertising links directed from Kriptokoin.com are on the site completely independent of Kriptokoin.com’s approval, and visits and pop-ups directed by advertising links are the responsibility of the user. The advertisements on Kriptokoin.com and the pages directed by the links in the sponsored articles do not bind Kriptokoin.com in any way.
Warning: Citing the news content of Kriptokoin.com and quoting by giving a link is subject to the permission of Kriptokoin.com. No content on the site can be copied, reproduced or published on any platform without permission. Legal action will be taken against those who use the code, design, text, graphics and all other content of Kriptokoin.com in violation of intellectual property law and relevant legislation.