The Ethereum ecosystem looks bullish after the Shanghai upgrade, and staking has seen steady growth. The recent upgrade laid the groundwork for future network scalability and performance developments.
The Ethereum network underwent a major milestone after successfully deploying the Shanghai upgrade, also known as Shapella, at epoch 194.048 on April 13.
The upgrade released the withdrawal of ETH staking, which had been locked since December 2020. EIP-4895 was an important proposal in this upgrade, enabling the release of a significant amount of staking ETH for Ethereum 2.0 after The Merge.
A Lot of ETH is Moving
Over 18.1 million ETH, valued at around $34.5 billion at 1.1917 USD/ETH, had been locked and represented 15% of the ETH in circulation.
Concerns about the massive withdrawals and their impact on the market amounted before the big event. The entire 18.5 million ETH in staking contract would be withdrawn. Only about 57,600 ETH would be withdrawn daily.
Furthermore, major third-party stakeholders like Lido, Coinbase, and Binance would only process user staking requests next week or extend the period to the following month, mitigating the withdrawal force.
Since the activation of Shanghai, nearly 318.38 ETH has been withdrawn from staking, equivalent to $669 million.
However, over 204.58 ETH has been staked, indicating that many validators withdrew staking ETH and moved it to liquid staking protocols like Lido or Rocket Pool for more liquidity flexibility.
ETH saw the strongest growth after Shanghai, surging by more than 10% to a new peak of $2,128, the highest since mid-May 2022 after the LUNA-UST crash. LDO and RPL prices followed suit, boosted by the momentum from Ethereum. Other major coins also experienced an upward trend of 3% to 8%.
Recent market trends and positive momentum suggest that an altcoin season has begun. The total cryptocurrency market capitalization has also surpassed the $1.284 billion threshold, which has not been seen since mid-May 2022.
While the crypto community is buzzing with excitement about the recent surge in altcoin prices, the wait for unstaking might not be over yet with major centralized exchanges.
Leading exchange Huobi is waiting to withdraw over 40,000 ETH from its staking service, accounting for about 5.1% of the total in the queue. Meanwhile, Coinbase, the largest cryptocurrency exchange in the US, has initiated withdrawal requests for 94,749 ETH, representing 10.8% of the total.
The biggest concern is Kraken – Kraken’s withdrawal request is the largest since the Ethereum upgrade in Shanghai on Wednesday. The platform registered a request to withdraw 556,272 ETH worth approximately$1.17 a billion.
According to blockchain data tracker Nansen, it accounts for 63.3% of all staked ETH in the withdrawal queue. Previously, the SEC fined Kraken $30 million for not signing up for its staking programs and forced the platform to close its service for US users in February.
Market Getting Firmer?
Glassnode’s findings suggest that the upgrade’s impact will not likely make a severe impact on the price of Ethereum.
The analysis states an estimated 170,000 ETH would be withdrawn from the Beacon Chain and returned to the market. Validators are expected to sell 100,000 ETH to take profits, while the remaining 70,000 ETH will be kept as liquidity.
These figures indicate that the upgrade has not caused a significant exodus from the Ethereum ecosystem. According to the data company, even in the extreme case of all the 170,000 ETH being sold upon withdrawal, the selling volume would still fall within Ethereum’s average weekly inflows.
The report also disclosed that third-party staking service users are the main beneficiaries of the unlocked ETH. Nevertheless, given the absence of interest on the original deposit, they are also the segment with the least demand for selling.
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Author: Nicholas Say