15% of the ETH supply had been locked until the Shanghai upgrade completed Thursday
There was no extra selling pressure, however, with ETH leading the crypto market, up 4.6% today
ETH has broken through the $2,000 barrier for the first time since May 2022
Ethereum stakers woke up for the first time in a long, long time this morning with the ability to…sell their ETH.
The Shanghai upgrade has been completed, meaning all the staked Ether – some of which has been staked since 2020, when ETH was below $400 per token – is now available for sale.
A common discourse in the run-up to the event was whether increased sell pressure would flood the market. I analysed this myself last month, with the market long discussing what the unprecedented event would do.
But around 16 hours in – the upgrade completed at 22:42 UTC time Thursday – ETH has provided an emphatic answer, not only resisting downward pressure, but leading the crypto market, up 4.6% since the upgrade.
Nothing spectacular, but on what amounts to a pretty flat day for the market across the board, a 4.6% jump since the upgrade is interesting.
Of course, not all Ether was completely locked up. Liquid staking derivatives were widely available, allowing stakers to receive tokens in return for their staked ETH which could then be traded as proxies, providing them liquidity – with the promise that the derivative tokens could be redeemed 1:1 once the upgrade went live.
This fact, in addition to the fact that the upgrade has long been priced in, ultimately combined to assuage any pressure on the price.
How much Ether was in the staking contract?
Nonetheless, having full liquidity again does make a difference, and there had been musings in the market as to what this could do for the price. As the upgrade went live, there was a chunky 18.2 million ETH locked up – priced in or not, that is a massive portion.
Comparing to the overall supply, that means over 15% of the supply was locked up…and then suddenly available for direct sale.
Particularly interesting is the hold period here. The earliest stakers locked up their ETH in late 2020, when ETH traded below $400. They then watched it rise close to $5,000 per token before collapsing down below $1,000. And all this while, it was locked.
That is a rollercoaster ride with many highs and lows in between. Although, many argued that those early stakers were in it for the tech, less interested in the price. Then again, we are all humans at the end of the day, aren’t we?
Ether breaks $2,000
Not only has fear of sell pressure proved unfounded for now – although that could still change – but Ethereum breached the $2,000 mark for the first time since May 2022. That was the month that the crypto industry was hurled into the lurch, as LUNA death spiralled to zero, taking a massive chunk of the ecosystem with it.
It’s probably not a reach to say that the Shanghai upgrade has come at a good time. Had the upgrade gone live last year, as panic and fear was extreme and prices were collapsing across the board, it could have been a different story.
Can you imagine if 15% of the ETH supply suddenly went live one week after FTX collapsed?
Instead, the upgrade came amid a buoyant period for crypto as a whole. Bitcoin is above $30,000 for the first time since last June, now up 83% on the year. Ether itself has banked inventors a 66% return year-to-date.
Obviously, these gains come from decimated levels, and Ethereum remains quite a nasty 60% off its all-time high of November 2021, when it hit $4,891, just running out of steam before the $5,000 barrier.
It may be a while before ETH gets back there – if it ever does, who is to say in the crypto market? – but whatever the price effects, the Shanghai upgrade is a vital step for the ecosystem as a whole.
It had been delayed many times – originally meant to be part of the Merge, formerly known as ETH 2.0, which itself was pushed out multiple times. But now it is in the rearview window, and ETH can continue to develop. Fundamentally, the upgrade has been a success, just like the Merge was last September.
Crypto prices depend on far more than that, however – and are far from science – and the macro environment remains challenging, even if interest rate hikes may be coming to an end, with the overall picture brighter than it was a few months ago.
This is still a difficult time. But, for today at least, there is reason to smile for ETH investors.
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