The long-awaited Shanghai and Capella Ethereum upgrade went live on April 12 and total withdrawals in the first 40 hours after the Shapella upgrade were 142,425 ETH, per nansen data. This is in line with previous estimates.
For a brief moment on April 12, when Shapella went live, deposits into ETH staking contracts exceeded withdrawals. However, deposits have slowed down on April 13, while withdrawals are strengthening.
ETH moved for withdrawals
Validators are required to update their staking software clients with withdrawal credentials changed to 0x01 from 0x00 and point to a valid Ethereum address. Once the validators do that, partial withdrawals, that is, withdrawals of rewards above 32 ETH, will be processed automatically.
Over 70.1% of validators have switched to 0x01, with 407,851.20 worth over $850 million set for removal.
Additionally, 875,325 ETH worth $1.85 billion is awaiting full outflow. In addition to the amount already processed in the first 40 hours, more than 1.42 million ETH will be withdrawn from the participation contract.
ETH withdrawals will be rate limited to 1,800 validators per day, which translates to a daily withdrawal of 57,600 ETH per day based on 32 ETH per validator. With 875,325 ETH awaiting full outflow, this corresponds to a potential daily sell pressure of between $120 million.
In the first three days, when partial withdrawals will also be processed, the total daily withdrawals will be 136,000 and 173,000 Ether per day.
However, the above statistics should be taken with a grain of salt because 62.8% are forced withdrawals from US-based crypto exchange Kraken in response to a $30 million settlement with the US Securities and Exchange Commission.
There is a chance that a significant portion of Kraken withdrawals will be moved to liquid staking decentralized (LSD) platforms like Lido, Frax, and Rocket Pool instead of being sold on the market.
Interestingly, Lido accounted for 56.07% of the withdrawals processed so far, which is a bit concerning as previous estimates suggested that withdrawals from Liquid Derivatives (LSD) platforms like Lido will be minimal.
Currently, 9.6 million ETH staked is in profit, which will continue to be more vulnerable to a sell-off. It also remains to be seen if more illiquid participants move to withdraw their ETH, with more than 34% deposited by them out of the 17.4 million deposited in total.
Ethereum Price Analysis
Technically, the ETH/USD pair looks bullish, having breached the $2,000 resistance level. Buyers will look to target support and resistance levels around $2,300 and May 2022 breakout levels around $2,900. Near-term support on the downside is around $1,725.
Related: Shapella Could Attract Institutional Investors To Ethereum Despite Risks
Funding rates for ETH perpetual contracts are in neutral territory, according to data from Coinglass. Typically, neutral perpetual market positioning after a large price rise means that traders are not yet enthusiastic about the current rally, which is represented by an increase in positive funding rates. It also allows more upside room for prices.
However, as there could be some spot selling pressure from ETH withdrawals, it is likely to restrain the uptrend in the market.
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