Crypto Analysts Split Over Ether Market Trends After Ethereums Shanghai Upgrade

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Shanghai’s upgrade of the Ethereum blockchain, or more accurately called Shapella, is almost here. The backwards-incompatible hard fork will allow users to access some $30 billion of ether locked on the network since the end of 2020.

Some observers expect Ether price to fade after the upgrade as users liquidate their holdings while others believe the expected surge in selling pressure is already priced in and the market will rebound after the event in a classic news buying movement.

Henry Elder, head of decentralized finance at Wave Digital Assets, sees the upgrade as a clear sell off of the news event for ether and for governance tokens from liquid staking solutions like Lido, which are rallying since early January in anticipation of the hard fork.

We should expect the withdrawal queue to fill up immediately and stay full for several weeks, Elder said. It will look like the fulfillment of the Supply Flood narrative and the markets will likely sell out.

Elder added: Most withdrawals will likely come from early individual staking solutions who now want to move to liquid staking solutions, and early adopters of now mainstream staking solutions who want to move to minority staking solutions to increase decentralization.

While the entire stack of over 18 million coins cannot be withdrawn immediately, partial withdrawals of just over 1 million coins earned as staking rewards can be processed immediately. This million ETH represents potential selling pressure after the upgrade.

According to Laurent Kssis, crypto trading advisor at CEC Capital, ether rallied ahead of the event and may come under pressure upon the successful implementation of the upgrade.

Traders bought the news ahead of the Shanghai event, and if the event is successful, they will throw their ETH into the market, Kssis said. He predicts that traders will sell their ether after the upgrade in the idea that they have made money for their time locked up and this will result in a strong supply of ether flooding the market.

Kssis said he sees Ether possibly dropping below $1,700 for the first time in two weeks as investors cash in on the profits.

At press time, ether was trading near $1,875, representing a 56% year-to-date gain, according to data from CoinDesk. Lido Finance’s LDO governance token, the largest liquid staking protocol with some $8.4 billion in ether staked on the platform, has gained 26% year-to-date, while competitor Rocket Pools RPL has gained 70% since January.

Sean Farrell, head of digital asset strategy at FundStrat, suggested otherwise, saying the market is too pessimistic about the supply-side effects of upcoming staking pullbacks.

Factors such as access to existing liquidity for most players, withdrawal queue limitations, and a market that reduced risk prior to the Shapella upgrade reduce the risk of a sudden excess of the offering, Farrell said in an interview with CoinDesk.

With this in mind, it is reasonable to expect ether-bitcoin [ETH/BTC] gathering in the weeks following the end of the event, Farrel added.

While ether has posted double-digit gains this year, the cryptocurrency has underperformed market leader bitcoin by a considerable margin. Bitcoin is up over 70% this year. The ether-to-bitcoin ratio fell by 13.6%. This is in contrast to the roughly 58% surge in the month before Ethereum implemented a software update called Merge in September last year.

The drop in ether-bitcoin suggests that fears of a supply increase after the upgrade have been taken into account to some extent. In addition, several industry experts, including Galaxy Digital, have recently stated that the selling pressure from partial withdrawals will be spread over several days.

We expect 553,650 ETH to be sold. Amortized over 7 days, this represents approximately 1% of daily ETH volume (including spot and perpetual futures volume) in sales per day for a week, analysts at Galaxy Digital said in a note released earlier this month. month. Based on the broader risk environment and overall Ether liquidity during the Shanghai upgrade, expected on Wednesday, April 12, we consider this amount to range from inconsequential to slightly bearish on ETH/USD.

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