Ethereum on-chain data suggests ETH sell pressure could be a non-event after the Shanghai upgrade

The upcoming Ethereum (ETH) Shanghai hardfork is slated to hap successful March 2023 and the upgrade volition headdress disconnected the network's determination to proof-of-stake (PoS) which started during the “Merge” connected Sept. 15, 2022. Once Shanghai is implemented, antecedently locked Ether volition gradually go liquid for the archetypal clip since December 2020. 

According to on-chain Etherscan data, implicit 16.6 cardinal Ether are presently locked successful the PoS staking protocol which was valued astatine $28 cardinal connected Feb. 16, 2023. Ethereum’s determination from proof-of-work (PoW) to PoS has started to execute the archetypal extremity which was to marque Ether’s proviso deflationary. In the 154-days since the merge, implicit 24,800 Ether person been burned to marque the token 0.05% deflationary connected a yearly basis.

Key Ether stats since the Merge. Source: ultra dependable money

On. Feb. 16, the full Ether proviso sits astatine 120 cardinal meaning that a small implicit 10% of the proviso volition beryllium unlocked with output rewards starting with the Shanghai update.

Let’s research what on-chain metrics tin assistance place what whitethorn hap during the Shanghai upgrade.

A information of locked ETH are liquid acknowledgment to liquid staking derivatives

In bid to payment from output rewards earlier the Shanghai update, investors had to fastener their Ether and tally a reliable node. The minimum staking request of 32 locked Ether is wholly illiquid, mean traders had constricted inferior options for these coins.

Liquid staking derivatives (LSD) let users to payment from staked Ether portion retaining the quality to merchantability the derivative token received connected the secondary market. The LSD protocols took a interest and locked the autochthonal Ether, giving users different token which represents a involvement successful the pool.

Liquid staking derivatives did not summation prominence until Lido and different protocols began to spot a rush of currency flow aft the Merge. Since Ether staking began, liquid staking has surpassed illiquid staking. As of Feb. 13, 57% of staked Ether is liquid versus 43% illiquid.

Liquid vs. illiquid staking. Source: Binance

Since a bulk of the locked Ether is done LSD, investors presently person entree to liquidity which could trim merchantability unit post-Shanghai.

Very fewer stakers are successful profit

Back successful December 2020 erstwhile Ethereum staking opened, the terms of Ether ranged from $400 to $700. Conversely, galore investors began staking erstwhile Ether was adjacent its all-time high of $4,200. According to Binance:

“We enactment a sizable magnitude of ETH (around 2M) was staked astatine prices successful the US $400 - 700 scope - this represents the earliest stakers successful Dec 2020 - a radical that is apt illiquid fixed that liquid staking was acold little known astatine the time.”

Because of Ether’s 69% correction since hitting an all-time high, galore of the investors that staked their Ether are presently astatine an unrealized loss.

Price erstwhile staking occurred. Source: Binance

The number of stakers that are successful nett are apt to beryllium beardown believers successful the Ethereum web since the day for liquidity was inactive chartless astatine this time. With a ample fig of stakers astatine a nonaccomplishment and those that are profitable apt to beryllium semipermanent investors, Ether terms whitethorn not spot a monolithic dump erstwhile the tokens are capable to beryllium unstaked.

Lido overtakes solo stakers

On Jan. 2, 2023, Lido officially overtook MakerDAO arsenic the highest TVL successful DeFi. As of Feb. 13, Lido is besides the largest staking entity successful Ether. With implicit 5 cardinal Ether staked successful Lido, the protocol represents 29.2% of each entities. Notably, astir 30% of each stakers person the enactment for existent liquidity done Lido.

Solo stakers that tally nodes took a hazard to tally nodes from location oregon with a tiny group. The solo staker apt believes that Ether is simply a semipermanent currency since nodes transportation outgo and risk. Solo stakers presently marque up 24.9% of each stakers.

Staked Ether by entity. Source: Binance

With astir 55% of each staked Ether being held by either solo stakers oregon Lido, the hazard of an Ether terms dump whitethorn beryllium reduced.

While the on-chain information surrounding the Shanghai fork whitethorn beryllium bullish for the Ethereum network, immoderate analysts are inactive predicting the imaginable for a crisp downside successful Ether price.

The views, thoughts and opinions expressed present are the authors’ unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.

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