Ethereum’s next upgrade, called Shapella, scheduled for April 12, has raised many questions in the cryptocurrency community about what it could mean for the second largest cryptocurrency. There have been suggestions that this update, which will allow validators to withdraw their staked ethers (ETH), would have a negative impact on the coin’s price.
CryptoQuant ETH Analysis: A Ray of Hope
According to speculation, if holders decide to sell their cryptocurrency holdings for profit, it could lead to a decline in market demand and a subsequent drop in Ethereum prices.
However, despite this potential outcome, cryptoquantification, a company specializing in data analytics, has allayed fears, saying the selling pressure may not be significant. The company argues that based on its profit and loss analysis, there is likely to be minimal selling pressure on ETH as a result of staking withdrawals after the upgrade.
The company predicts that there will not be significant selling pressure because the majority of staked ETH (9.4 million ETH, equivalent to 52% of the total) is currently in loss. On the other hand, the company notes that the average depositor in the largest pools is also experiencing losses.
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In this context, it is unlikely that these market participants will sell their ETH at the current price and make a profit or recover their entire investment. This is because they invested in these activities when the cryptocurrency was trading at a higher value than it currently is. According CoinMarketCapthe current price of ETH is around $1,800.
Furthermore, the company highlights that staked ETH, which is currently earning, is generating returns of up to 30% or less, which they consider relatively low compared to the significant gains that the Ethereum market can sometimes provide via of its price volatility.
Based on this, CryptoQuant emphasizes that “selling pressure arises when market participants make extreme profits”, which is currently not true for staked ETH. This means that there may not be a significant drop in the ETH price due to the Shapella update.
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Ethereum price tops $1,900, its highest level in 8 months
On Wednesday, April 5, 2023, the price of ether (ETH), the cryptocurrency of the Ethereum network, exceeded $1,900, a level that it had not reached in 8 months. The last time ETH reached this price was on August 15, 2022. In contrast, Bitcoin (BTC), the leading cryptocurrency on the market, has not seen a similar rise. According TradingViewBTC price briefly touched $29,000 twice during the last two weeks of March 2023.
The fact that ETH is experiencing an increase while BTC is not suggesting that the current rise in the price of ETH is not driven by the movement of BTC, which is often the case. Instead, it is powered by the internal Ethereum market. According analyst miles deutscherthis is because investors are showing interest in ETH in anticipation of the upcoming Shanghai (Shapella) update.
Shapella represents a significant change that Ethereum will implement on its network on April 12, allowing the withdrawal of staked funds. Therefore, the anticipation of this event may have contributed to the recent rise in the price of ETH. Additionally, various players in the industry, including Binance US and Huobi exchanges, have taken the initiative to remind the public about the upcoming update this week.
Featured image from istock.com, chart from Tradingview.com.