Will Ethereum’s Shapella Upgrade Trigger a Bullish or Bearish Market?
Will Ethereum’s Shapella Upgrade Trigger a Bullish or Bearish Market?
News report by Ray Fernandez (April 10, 2023)
Ethereum—the second largest digital cryptocurrency with a market cap of $228.27
billion—will complete its final blockchain dual upgrade, known as Shapella on April
12.
The ETH upgrade plan began in 2020 with the Beacon chain and moved forward
with the Merge, transforming Ethereum’s blockchain consensus protocol from
Proof-of-Work (PoW) to Proof-of-Stake (PoS).
The biggest change that Shapella will introduce is that validators will be able to
partially or fully withdraw their stake for the first time since the new blockchain
was introduced. Approximately 14% of all ETH are staked, accounting for 16 million
tokens and a current value of more than $26 billion.
The Future of ETH Staking Liquidity
Anticipation has been building among crypto analysts, investors, and those who
have been supporting ETH acting as validators. Once staked ETH becomes
available for withdrawal, the revenue of liquid staking providers will likely
significantly increase, and coin price may be positively impacted.
Ethereum deposits across all top staking providers — Lido, Coinbase, Rocket Pool,
Frax Ether, and Stake Wise — have been rising since 2020 when the new Beacon
chain officially opened up for business. And Investors believe that the Shapela
upgrade will add continual interest, despite some arguments signalling to the
dangers of a wave of simultaneous withdrawals.
Brian Mosoff, CEO of Ether Capital, a public company with 36,000 ETH stake, told
the press that they have no intention of withdrawing. Excited about the final
transition of ETH, the CEO added that withdrawals would inevitably provide
much-needed liquidity. Liquidity will undoubtedly attract new investors, including
traditional finance institutions, fortifying the digital coin in the mid and long term.
However, stakers and traders are not always in agreement. While ETH stakers are
early adopters and believers of the Ethereum community, ETH traders and holders
always have their eyes set on market indicators, and sell-offs are one of their
biggest nightmares.
Believers and Built-In Anti-Exodus Withdrawals
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Ethereum says that while they can not predict how much will be withdrawn over
time, a sell-off is highly unlikely for two reasons. The first is simple.
Most stakers are early adopters who chose to participate in the initial stages of
the ETH switch from PoW to PoS. These stakers are hard believers of Ethereum, as
they invested willingly, locking up their stake, even when they did not have a
definitive date for when withdrawals would be enabled. The community of stakers
is expected to continue to support the ETH blockchain even more today, as
liquidity comes into the equation.
A recent survey of OKX revealed that 83% of surveyed expect an increase in
staked ETH in the next three months. The changes are also viewed as positively
influencing the coin’s price, with 63% surveyed saying that ETH will hit a new
record high of over $5,000 before 2023 ends. More than half (59%) say that the
price of ETH will continue to increase after the upgrade.
The second reason highlighted by Ethereum as to why withdrawals won’t impact
the coin nor the blockchain, is a built-in technical element. This feature will
prevent a massive exodus of stakers withdrawing at the same time.
“To ensure the PoS consensus mechanism remains active and the number of
validators stable, Ethereum implemented a withdrawal queue for all stakers
wishing to exit,” Ethereum says. This “withdrawal queue” will limit the number of
validators that can leave the ecosystem simultaneously.
Short, Mid, and Long-Term ETH
While the price of ETH may or may not drop during the first stages of Shapella, the
upgrade is expected to be a non-event for the coin. And while liquidity will make
the crypto more attractive for new investors, their effect on ETH will not happen
overnight.
The big news is that Shapella marks the end of a transition plan that has more
than two years in the making. The upgrade was designed to improve
performance, energy consumption, governance, and security. Ethereum has
executed the complex upgrade flawlessly so far.
The second leading coin in the world and its new PoS blockchain will be, without
question, stronger than it was before the upgrades began. To date, ETH registered
a year to date 88.9% increase in price and a six-month price increase of more
than 107%.