Ethereum’s Shanghai Upgrade could bring $2.4B Selling Pressure to Ether: Observers

April 7, 2023

By Anjali Kochhar

Some experts are warning that Ethereum’s upcoming Shanghai upgrade, which allows users to withdraw their “staked ether” deposited for network security, may lead to an increase in selling pressure on the market.

This fear is based on the possibility that some holders may rush to exchanges to liquidate their tokens.

According to some observers, the resulting increase in selling pressure could be worth a couple of billion dollars.

“1.1M ETH related to partial reward withdrawals could face the market, while Celsius [Network] is likely to sell its 158K staked balance as part of its bankruptcy process. These two numbers represent nearly 1.3M ETH or approximately $2.4B worth of potential sell-side pressure to face the market,” analysts at K33 Research said in a note to clients on Tuesday, as per CoinDesk report.

Over 18 million ether has been staked in the network since the Beacon Chain went live in December 2020.

While the entire balance cannot be unstaked immediately after the upgrade, about 1.1 million coins earned as rewards for staking can be instantly withdrawn. Ether stakes are paid rewards in ETH.

Additional selling pressure could come from the bankrupt crypto lender Celsius liquidating its staking balance of 158,176 ETH to recover at least a portion of creditors’ funds.

San Francisco-based cryptocurrency exchange Kraken may also unstake all ETH staked by U.S. investors, further contributing to selling pressure. However, the expected supply boost only represents about 20% of Ether’s average daily trading volume and will likely be distributed over several days, allowing buyers to match the selling pressure without a significant impact on the price.

“Kraken will unstake all ETH staked by U.S. investors as a result of its Wells Notice [from the Securities and Exchange Commission], this could entice some of Kraken’s ETH stakers to sell,” analysts noted.

More than 18 million ETH have been locked into the network since December 2020.

The expected supply boost of more than $2 billion amounts to just 20% of ether’s average daily trading volume, according to data sourced from CoinGecko.

Partial withdrawals are likely to take between five and six days to process, and full withdrawals three weeks and four months, according to an analysis by 21Shares.

In other words, the selling pressure will likely be distributed over several days, allowing buyers to match the selling pressure.

“Thanks to the modest daily limit on the original 16.27M ether, this potential selling pressure is evenly distributed over a long time. This should allow buyers to match the selling pressure without much impact on the price,” Saxo Bank’s cryptocurrency analyst Max Eberhardt, said in the Shanghai Upgrade preview.

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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