A Multi-Perspective Analysis of the Market Impact of the Ethereum Shanghai Upgrade

Ethereum plans to undergo the Shanghai upgrade in March this year, which includes the opening of ETH staking unlock (EIP-4895). As of now, the total amount of staked ETH is approximately 15.85 million, accounting for 13% of the total supply, with 495,000 active validators and an annualized yield of 4.2%.

There is a viewpoint that staking unlocks may trigger significant selling pressure, especially considering the low costs for early participants. However, analyzed from multiple angles, this concern may be exaggerated.

1. Gradual Release Mechanism

Shanghai upgrade adopts a gradual unlocking model, with a daily withdrawal limit of approximately 55,000 Ether. This mechanism can effectively prevent a sudden large outflow and smooth market impact.

2. Characteristics of Early Participants

Early staking users are mostly long-term supporters with a high risk appetite, and they have a lower willingness to sell in the current market conditions.

3. Some withdrawal requests have been released

Users who have staked through protocols like Lido already have exit routes, such as exchanging stETH for ETH through Curve. Last year, stETH experienced a discount, and some exit demand has been met.

4. Attractiveness to Institutional Investors

The unlocking of staking may instead attract more institutions and large holders to participate:

• Enhance user confidence
• Provide a better exit mechanism
• Provide relatively stable returns in a bear market

It is expected that after the staking is opened, the ETH staking volume may exceed 20% of the total amount within a year.

5. Staking Cost Analysis

Although the earliest staking cost was around $500, most staking may occur above $1,500, which is higher than the current market price.

6. Fundamental Changes in the Nature of Ether Assets

• ETH is heading towards deflation, reducing the daily potential selling pressure.
• Staking rewards make ETH a fundamental asset of the ecosystem.
• The new issuance rate of ETH is significantly lower than that of other crypto assets.

7. The Importance of Community Consensus

Ethereum has a strong developer, ecosystem, and user base, forming a solid community consensus. With the development of the ecosystem and L2 expansion, its position as a settlement layer and security provider will be further consolidated.

8. The Dynamic Balance of Staking Yield

The amount of ETH staked is inversely related to the yield, forming a self-regulating mechanism. Low staking volume leads to high yields, attracting more participants.

9. Other Optimizations of the Shanghai Upgrade

In addition to the staking unlock, the Shanghai upgrade also includes several technical improvements, such as reducing gas fees, supporting more complex smart contracts, etc., which are beneficial for the long-term development of the ecosystem.

Conclusion

In summary, the impact of Shanghai's upgrade to open the staking withdrawal feature on ETH's selling pressure may be limited. This upgrade is generally beneficial for the long-term development of the Ethereum ecosystem and can be seen as a positive event.

However, it is important to note that while the upgrade itself may not cause large-scale selling pressure, the price of Ether is still influenced by various factors. Investors should maintain independent judgment and manage risks appropriately.