Ethereum’s Shanghai upgrade could put $2.4 billion selling pressure on ETH

Ethereum’s non-backwards-compatible Shapella hard fork, or Shanghai upgrade, is expected to take place within seven days, allowing users to withdraw “staked ETH.”

The market remains concerned that the upcoming ETH unlock event will cause some holders to flood exchanges to liquidate their tokens.

Selling pressure could run into the billions, according to some observers.

“The market will likely see 1.1 million ETH in the block rewards sale, while Celsius Network will likely sell its 158,000 collateralized balance to pay for bankruptcy proceedings. These two numbers represent a potential sale of nearly 1.3 million ETH or about $2.4 billion Um,” analysts at K33 Research said in a note to clients on Tuesday.

Since the launch of Beacon Chain in December 2020, more than 18 million ETH have been invested in the network.

While the entire balance cannot be unstaked immediately after the upgrade, the approximately 1.1 million coins earned as staking rewards can be withdrawn immediately. Staker ETH Get rewarded in ETH.

Additional selling pressure could come from bankrupt crypto lender Celsius liquidating its 158,176 ETH stake balance to recover at least some of its creditors.

The San Francisco-based Kraken exchange has recently come under fire for not registering to offer a crypto-as-a-service staking program in the United States, so it is likely to unstake all of its funds, K33 reported. ETH has been being staked by investors across the states. At the time of writing, the amount of ETH staked via Kraken is 1.2 million.

Analysts noted:

“As a result of the SEC’s Wells announcement, Kraken will unstake all ETH from US investors, which may induce some Kraken ETH stakers to sell.”


As of December 2020, over 18 million ETH is locked in the network | Source: Nansen

A major sell-off is unlikely

According to data from CoinGecko, the estimated supply increase of more than $2 billion accounts for only 20% of ETH’s average daily trading volume.

According to 21Shares analysis, partial withdrawals can take 5 to 6 days to process, while full withdrawals can take up to 4 months and 3 weeks.

In other words, the selling pressure will spread over a few days, allowing buyers to react to the situation.

“With the initial modest limit of 16.27 million ETH, this potential selling pressure is evenly distributed over a long period of time. This will allow buyers to respond to the selling pressure without too much impact on the price,” Saxo Bank analysis Teacher Max Eberhardt said.

Eberhardt added that most ETH stakeholders are long-term investors and are unlikely to liquidate their holdings after the upgrade.


Source: K33 Research

K33’s chart shows that 46.3% of ETH staking is profitable because current market rates are higher than prevailing rates while these tokens are locked in the network. Meanwhile, 28.04% of staking earned more than 20% profit.

This figure drops to 24.2%, excluding token staking through the liquidity staking services offered by Lido and Coinbase. According to K33, 66% of this 24.2% (equivalent to 16% of all ETH pledged) were deposited by long-term investors before February 2021.

Analysts at K33 concluded:

“With ETH trading down 63% (an all-time high), it’s unlikely that most of the pool is heavily staked. Tokens tied to liquid collateralized derivatives are unlikely to be unlocked for sale.”

Ming Ying

According to Coindesk

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