Most of the blockchain updates have an impact on the price action. The Ethereum Shanghai upgrade would be no different. Ether supplies on exchanges have already begun to plummet as investors opt to move their assets to self-custody.
The previous Ethereum upgrade created some nice volatility in the market, which traders took advantage of. ETH prices skyrocketed from around $1,000 in July 2022 to over $2,000 in August and reached around $1,800 right around the time of the Merger. With Ether supplies rapidly plummeting, traders may see another spike in price leading up to the Shanghai upgrade.
However, short-term traders may want to note the drop in the price of Ether since the merger was pushed in 2022. This update may not be much different. The other factor to note is that Ethereum users who have not been able to withdraw their staked Ether for over two years will have access to do so right after the Shanghai update.
With over 16.4 million ETH staked, if any of that hits the market, it could increase the supply of Ether and drive prices down right after the Shanghai update completes. This relationship between supply and demand is a fundamental principle of economics and is a key factor in determining the price of any asset, including cryptocurrencies, stocks, bonds, and commodities.
It is also worth noting that while there are downside risks to price action after the Shanghai update due to staking withdrawals, ETH withdrawals will only be available in small portions. For example, traders who wish to withdraw their Ether after the upgrade will only be able to do so in stages over time.
This could mitigate downside risks to Ether prices. But the fear of increased supply is something that could hurt market confidence in the short term.
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