Ethereum, the world's second largest cryptocurrency by market capitalization, is gearing up for a major network upgrade that will allow stakers to withdraw their locked funds for the first time since December 2020.
Lucas Outumuro, an analyst at crypto analysis company IntoTheBlock, evaluated the impact of the Shapella upgrade on cryptocurrencies in his statements on Twitter.
He explained that the upgrade will activate two sub-upgrades: Shanghai and Capella. Shanghai will affect Ethereum's execution layer, while Capella will affect the consensus layer and Engine API.
Not all Ethereums can be withdrawn at the same time on April 12
The most anticipated feature of Shapella is that ETH tokens can be removed from the main contract. Currently, around 18 million ETH have been staked on Ethereum 2.0, worth about $34 billion at current prices.
However, not all of this amount will be withdrawn at once, as there will be an exit queue for withdrawals depending on the number of validators and the removal request.
Outumuro said there are two types of withdrawals: partial and full. Partial withdrawals are transactions where only profits are withdrawn, while full withdrawals are transactions where initial deposits and profits are withdrawn. The analyst estimated that partial withdrawals would take 4-5 days if made on the day of the upgrade, while full withdrawals, which account for the majority of ETH stakes, would take much longer.
“Given the number of validators available, it is estimated that 1/3 of full withdrawals will take around 100 days to take place. This translates to $80 million to $100 million of ETH withdrawals per day. By comparison, ETH averaged 9.5 per day this week,” the analyst said. billion dollars traded,” he tweeted.
He also stated that the fact that ETH can be withdrawn does not mean that it will be sold. He said that to understand the trend to sell staking funds, it is necessary to look at the main platforms in the staking space. He identified liquid staking derivatives (LSDs) as one of them.
1/ Ethereum's Shapella upgrade is set to happen on April 12, enabling the withdrawals of $34B of staked $ETH
But how much of it can we expect to hit the market? And what’s its longer-term effect?
Deep-dive article: https://t.co/3GPhmqWRx6
TLDR thread 👇
— Lucas (@LucasOutumuro) April 7, 2023
He concluded by saying that Shapella is a positive development for Ethereum in the long run because it will increase the security and decentralization of ETH. He also said it will create more opportunities for arbitrage and yield farming with staked ETH.
As a result, Outumuro said he expects to initially withdraw around $100 million worth of ETH per day, which is roughly 1% of the daily volume of ETH.
Outumuro said that American CEX users can sell some of their staked ETH, but these represent only 20% of the staking power and the remaining 80% appears stable over the long term.
The analyst also predicted that LSD dominance would increase for Ethereum as they offer more flexibility and liquidity to stakers. He stated that as more users join the staking process with lower entry barriers, the total amount of ETH staked should increase after a few weeks.
*Not investment advice.
