It has been 200 days since Ethereum switched from the energy-intensive PoW consensus mechanism to PoS, and the impact on the network’s token economy has been evident.
As the merger took place, the number of incentives given to network operators was reduced. Combined with the previously introduced burning mechanism – the fee generated by burning part of the transaction, this has the effect of reducing the supply of ETH.
Since the merger, the total supply of ETH has decreased by 75,000 coins ($134.5 million), down 0.114% year-over-year. By comparison, if the merger hadn’t happened, the total supply would have increased by 2.2 million — worth more than $4 billion at current prices.
The total supply of ETH has steadily declined in recent months | Source: ultrasound money
However, after The Merge, it is temporarily impossible to unstake ETH until April 12, when the Ethereum Shanghai upgrade is implemented.
Shanghai will allow ETH stakers to withdraw tokens (but not all at once), and the stake pool can decide when to release rewards.
For example, Coinbase Announce Will start accepting counter pledge requests 24 hours after completion in Shanghai. However, the exchange also noted that “unstaked demand will be high shortly after the upgrade and the protocol may take weeks to months to process.”
ETH staking giant Lido Finance owns share Withdrawal of stETH on mainnet is planned to begin around mid-May – after code audits are complete and two weeks of security restrictions are in place.
Wait times can be long, mostly due to on-chain technical limitations. Only 16 partial withdrawal requests (including staking rewards only) are processed every 12 seconds. Therefore, the queue for withdrawals may be long when Shanghai goes live. A full exit (when a validator completely removes itself from the Ethereum blockchain) can also take a relatively long time.
Chris Burniske explains why unlocking ETH is a bullish event
Well-known analyst Chris Burniske recently shared his views on the unlocking of Ethereum Staking and its potential impact on the market. Contrary to some analysts’ belief that the event will cause significant selling pressure on ETH, Burniske believes that unlocking Ethereum staking is a bullish process in the medium to long term.
An upcoming Ethereum update will allow investors to withdraw funds from staking contracts, regaining control of their investments. While at first glance this might seem like a bearish sign, Burniske believes that the ability for one person to control a currency is actually a positive development for the asset. In his view, more control by investors over their investments should lead to improved price performance rather than a sustained downward trend.
Burniske’s view is rooted in the fundamental principle that investor confidence is an important driver of market performance. As investors have more control over their funds, they have more confidence in their investments and the ecosystem as a whole. Conversely, increased confidence could spur more investment and interest in the Ethereum network, ultimately contributing to the long-term growth of the asset.
Additionally, as Ethereum functionality continues to evolve and expand, the potential for new innovative use cases will increase. These developments could attract more investors, further supporting Ethereum’s growth trajectory. As more investors enter the market and contribute to Ethereum’s staking ecosystem, the value of the asset is likely to trend upward, confirming Burniske’s bullish outlook.
It is also important to note that not all investors who withdraw their pledge will necessarily sell the asset afterwards. Some may choose to reinvest in other projects on Ethereum or hold ETH in anticipation of future price increases. The potential for diversified investor behavior could mitigate any immediate sell pressure from unlocking staking.
- What does the Ethereum Shanghai upgrade mean for ETH and the SEC?
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