Ethereum Selling Pressure Will Be Low After Shanghai Upgrade, Here’s Why

Jake Simmons

2 years ago

3 mins read

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The Ethereum Shanghai hard fork is just around the corner and is expected to be activated on the mainnet sometime in March 2023. While the network will hereby take another significant milestone, investors are looking anxiously at the upgrade as it could bring massive selling pressure.

But on-chain data platform CryptoQuant published an in-depth analysis today that suggests there are two good reasons why selling pressure on Ether (ETH) will remain low even after the Shanghai upgrade.

Ethereum Shanghai Hard Fork Does Not Threaten Price

Currently, there are 17.065 million ETH staked in the deposit contract, which is 14.12% of the total supply. The fear among investors is that there could be a massive dump in the Ethereum price when a majority of ETH becomes available for the first time in over two years.

However, this concern is unfounded for two reasons: First, there is an exit queue, as Ethereum’s exit period is dynamic and not static like other proof of stake networks, meaning that not all ETH can be dumped all at once but over a long period of time, as NewsBTC reported.

On the other hand, a majority of ETH stakers would have to exit their positions, an assumption that is unlikely, according to CryptoQuant. In its report, the analysis firm concludes that selling pressure for ETH will remain low after the Shanghai upgrade.

This is the conclusion of CryptoQuant after analyzing the profits and losses of ETH stakers. The company has found two arguments for this: 60% of the staked ETH are in loss, and the depositors of the largest staking pool are also in loss:

1- Currently, 60% of staked ETH is at a loss, representing 10.3 million ETH.

2- The largest staking pool (Lido) holds almost 30% of all staked ETH at an average loss of nearly $1,000. The staked ETH has an average loss of 24%.

Ethereum beacon contract deposits | Source: Twitter @cryptoquant_com

The analytics firm backs its theory by saying that selling pressure usually occurs when participants make extreme profits, which is not currently the case with the staked ETH. “Additionally, the most profitable staked ETH was staked less than a year ago and has not seen significant profit-taking events in the past,” CryptoQuant says.

Dynamic Exit Queue Prevents Mass Exodus

Rich Falk-Wallace, CEO of research firm Arcana and former portfolio manager at Citadel, agrees with CryptoQuant’s analysis but took the other analytical approach.

In a worst-case scenario presented Tuesday, the analyst projects that it would take more than two years for the number of validators to drop from the current 536,000 to 100,000 if the maximum validators churn occurs.

If this scenario were to happen, Falk-Wallace estimates that selling pressure could be about 6% of daily volume (0.2% of total ETH) in the first three days, 1% for the next six months, and 0.3% over an 18-month period.

https://twitter.com/rfw_arcana/status/1630570841221079040

At press time, the Ethereum (ETH) price was trading at $1,641. On the upside, $1,700 remains the main resistance, while $1,560 is the line that the bulls need to defend.

Ethereum price ETH USD — ETH price, 4-hour chart | Source: ETHUSD on TradingView.com

Featured image from Bastian Riccardi / Unsplash, Chart from TradingView.com

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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