Ether nears $2,000 after Shanghai upgrade, outperforms Bitcoin

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Ether rose to $1,994 on Thursday, hitting the highest point since August.

The rally to an eight-month high stemmed from a successful network upgrade called Shanghai, or Shapella. The upgrade implemented during Asian hours allows withdrawals for users who have staked their ether, a process that helps secure and validate transactions on the blockchain. In the first few hours after the upgrade went live, Ether traded quite stable.

The second-largest cryptocurrency by market value has gained more than 3% since the upgrade, while market leader bitcoin has added less than 2%, according to data from CoinDesk. The ether-to-bitcoin ratio increased by more than 2.5%.

Have seen a rumored sale buy the fact redux. ETH underperformed BTC with uncertainty around the upgrade and potential supply momentum from the unlock. Now that the risk event has passed, no substantial selling pressure, the market can unwind the short hedges and rebalance back towards ETH, David Brickell, head of institutional sales at crypto-liquidity network Paradigm, told CoinDesk .

As the pivotal hard fork approached, analysts were divided on how the backwards-incompatible upgrade would impact the price of Ether, with some anticipating a rush from investors to liquidate holdings.

The selling pressure, however, will likely be less than the market initially feared, according to North Rock Digitals founder Hal Press.

There was a large backlog of 15,000 [validators] waiting to enter the output queue, which did so linearly. Now that they’ve been processed, it’s flat. This puts us on schedule to clear the queue in about 2 weeks and matches my previous estimate of about $300 million in total selling pressure, Hal Press tweeted.

This is still much more bullish than my base assumptions from a few weeks ago,” Press added.

Overall, demand for unstaked ether has been subdued as a significant portion is currently held at a loss. The biggest custodian so far has been Kraken, which is shutting down its staking service for US users as part of a settlement with the Securities and Exchange Commission.

“Over 77% of ETH withdrawn is from the Kraken exchange and the majority of ETH withdrawn by validators outside of that are rewards, not rewards plus upfront stake. This is more constructive than what the market had potentially planned,” Lewis Harland, Decentral Park Capital’s portfolio manager, said.

“With withdrawal restrictions in place and liquid staking derivatives like Lido not implementing withdrawals until May, we think the market realizes that they are overpriced on leveling issues allowing the ETH to finally test the $2,000 level once again,” Harland added.

Liquid Lido staking solution accounts for approximately 31% of all ether deposits. So far, 108,402 ETH has not been staked, according to data source Nansen.

Year-to-date, ether is up 65.25%, versus bitcoin, up 82.04%.

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