This week, investors will finally obtain access to more than $33 billion worth of ether as part of a revamped blockchain.
Shapella, a new software upgrade to the Ethereum blockchain, will allow market participants to redeem their “staked ether” – coins they have deposited and sealed up on the network in exchange for interest over the past three years.
Approximately 15% of all ether is staked, with a total market value of $33.73 billion, according to data from Dune Analytics.
Sreejith Das, CEO of Attestant, a company that facilitates the pledging of ether, estimates that up to 1,100,000 ether will be available for withdrawal within a week of the revamp of the blockchain. Based on the current ether price of roughly $1,860, this would be worth close to $2 billion.
Traders seeking a competitive advantage are currently attempting to predict how this unexpected ether windfall will affect prices. Robert Quartly-Janeiro, chief strategy officer at the cryptocurrency exchange Bitrue, remarked that evaluating the situation is challenging.
“The only certainty is that the Shanghai hard fork will cause some volatility in the short term,” he added.
Unlocking staked coins is feared by some market participants to result in massive withdrawals and a surge of selling, which could precipitate a precipitous price decline.
According to Bundeep Rangar, CEO of blockchain investment firm Fineqia International, only about 29% of all ether staked by volume is presently profitable in dollar terms, meaning that the majority would be sold at a loss. (FNQ.CD).
“Therefore, it seems unlikely that much of the staked ether will be sold,” added Rangar.
“FINAL PIECE OF THE JIGSAW”Shapella would signify the end of a long wait for investors who deposited ether in exchange for a return since the staking project’s inception in 2020.
Ethereum developers paved the way for this development with a major upgrade called “Merge” last year, which abandoned energy-intensive mining in favor of a “proof-of-stake” system in which ether owners stake 32 coins to verify new records on the blockchain, earning new ether in addition to their “staked” coins.
Prior to this week’s scheduled update, investors seeking to stake coins were required to deposit a minimum of 32 ether at a time (worth $59,520 at current prices) for an indefinite period of time, a sum well beyond the means of the average retail investor.
Dave Weisberger, CEO of digital asset trading platform CoinRoutes, stated that, prior to Shanghai, many individuals and institutions chose not to stake their ether because it would have been sealed up for an unspecified period of time, which was risky.
Following the upgrade, ether staked on the blockchain will no longer be sealed, so investors may be more inclined to stake coins.
In anticipation of future growth, the market value of tokens backed by Lido Finance and Rocket Pool, two of the largest projects providing liquidity for crypto staking, have increased nearly sixfold to $2 billion and fourfold to $875 million, respectively, according to CoinMarketCap.
“It is likely that the amount of ether staked will increase over the long term, especially when compared to the proportion of supply staked for other digital assets such as Solana, Mathic, and Ada,” said Rangar at Fineqia.
So, what types of investors are likely to enter the market as a result of Shapella’s changes?
“It will be the institutions that have sat on the sidelines, silently waiting for this final piece of the puzzle to be implemented,” said Das at Attestant. “These institutions required the ability to withdraw their ether prior to being permitted to stake it.”