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Analysts expect over $300 million in Ethereum trades after Shanghai

Analysts expect over $300 million in Ethereum trades after Shanghai

Analysts at Glassnode estimate the sale of over 170,000 Ethereum worth around $326 million following today’s much anticipated Shanghai upgrade.

The update, dubbed “Capella” for its consensus layer, would allow users to withdraw ETH that has been trapped on the Ethereum network for the past two years.

Validators quitting the network

Ethereum began its transition to a proof-of-stake network in December 2020, allowing validators and other interested stakeholders to begin passively earning dividends on ETH pledged to the network. The transfer was accomplished in September of last year following the “merge,” an upgrade that linked the Ethereum mainnet with the proof-of-stake beacon chain.

Users who have wagered Ethereum, on the other hand, are unable to withdraw their initial investments or wins. However, everything changes later today.

Validators quitting the network and bringing their staked holdings with them, As shown in a report published today by Glassnode researchers, will add roughly 70,000 ETH to the freshly released value. Based on the data, 253 investors are willing to do so, while analysts believe that “withdrawals are most likely related to a change in their technical setup, rather than exiting their position.”

The remaining 100,000 ETH is expected to be provided by users who withdraw their staking winnings to resale on the open market. Glassnode specialists predict that only roughly $133 million in ETH will “actually become liquid” if withdrawals are authorized.

Validators protect the network in proof-of-stake networks, as opposed to miners in proof-of-work blockchains such as Bitcoin. Anyone on Ethereum can stake 32 ETH (about $60,000) to become a validator and get rewards. A malevolent validator faces the “slashing” penalty, which deducts ETH from the amount staked.

Despite the fact that Glassnode forecasts that up to $326 million in Ethereum may enter the market, the article notes that the move “is expected to be much less dramatic than many have portrayed it,” adding that if the Shanghai upgrade is successful, it will “boost a growing staking industry.”

It is also important to understand that withdrawal requests will be queued and will not be completed immediately. Individual stakeholders may have to wait at least two days to receive their payments, whilst those that use aggregation services like Lido or centralized providers like Coinbase may have to wait weeks or even months. As a result, any ETH taken from the staking contract will not be delivered to the market right away.

Who is the Ethereum stakes seller?

Marc Arjoon said that a research associate at CoinShares, and other analysts, the influence of Shanghai on the Ethereum market in the short term is expected to be small.

Arjoon thinks it is largely due to liquid staking providers like Lido Finance.

Users have been able to trade their staked Ethereum tokens (stETH) for ETH on exchanges like Curve Finance, and Lido Finance distributions are also dependent on the availability of ETH withdrawals.

When customers deposit Ethereum on a liquid staking platform, they obtain an equivalent staked version of Ethereum that they can use on other DeFi platforms, such as non-custodial lending and trading platforms.

If such players wanted to abandon the market, he said they could simply sell their tokens on the secondary market at a 1:1 ratio.

Arjoon expects that many “tech-savvy” speculators with the 32 ETH required to qualify as validators are unlikely to sell.

They elected to stake their ETH with an unlimited lockup time. “To be conservative, I would say that 50% of those entities would withdraw and sell their ETH.”

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About MahKa

MahKa loves exploring the decentralized world. She writes about NFTs, the metaverse, Web3 and similar topics.

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