In two days, Ethereum's Shanghai Upgrade will take place, allowing $ETH stakers to unstake their $31B worth of $ETH, which accounts for around 15% of its supply. I came across this news on a Twitter profile that labeled the event as Ethereum's doomsday – predicting a sell-off. Intrigued, I decided to delve deeper.
Since December 2020, Ethereum validators were encouraged to lock 32 ETH as part of the required migration to the Proof of Stake consensus. So far, stakers have earned about a million ETH in rewards, which will become accessible after the Shanghai upgrade.
Curious about the upgrade's potential impact on the market, I asked
@edicted for his thoughts. He presented a bullish scenario, arguing that the ability for people and institutions to stake and unstake at will should encourage even more staking, particularly for the ~5% interest rate.
While unstaking events can lead to potential token dumping, it's important to note that not all staked ETH will be available for withdrawal immediately. Lido, for example, won't allow its users holding staked ETH (stETH) to redeem $ETH initially, adding a 2-week 'safety margin.' Similarly, Coinbase will implement a 24-hour delay. These measures might not prevent a dump, but they will undoubtedly cushion the effect.
The whole operation makes me wonder about Hive, imagine an upgrade was made to Hive wallets staking mechanism where users can power up tokens and power down without a lock up period, will it lead to people selling off? I highly doubt, infact it may lead to more people buying and staking Hive as they know it doesn’t have to lock up. You get the drift.
Lately, ETH's price has displayed bullish signs, surging to $1900 in the past week and maintaining strong momentum at the $1800 range. Whether the Shanghai upgrade will influence this bullish momentum remains to be seen.
However, if we consider that a significant amount of money was willingly locked (staked) for an extended period, it's likely that an even larger sum will be staked when users are given the ability to stake and unstake at will. In my opinion, the Shanghai upgrade will not be Ethereum's doom, but rather a boon for the platform and its holders.
Regardless of the outcome, I eagerly anticipate the success of this event and hope it brings more positive developments to the crypto space. What are your thoughts concerning the Ethereum Shanghai upgrade?
