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Ethereum’s long awaited shapella upgrade went live on 12th April that enabled withdrawals of staked ether from the network. Contrary to the selling pressure predicted by experts, Ether has defied expectations and has rallied ~9% since the upgrade. On 17th April, ETH changed hands for $2,138, its highest level in 11 months. In today’s article we are analyzing the state of Ethereum, post its shapella upgrade.
While it's important to remember that Ethereum is still a risky and volatile asset that can rapidly decline for any reason (or no reason at all), the Shapella Upgrade has only increased the bullish sentiment about Ethereum. The Shapella upgrade intended to bring significant changes to the Ethereum network from reducing the transaction fees, increasing the network TPS to open up the Beacon-chain Validator's withdrawal function, through which the staked ether (ETH) can be withdrawn by the validators.
It has been a week since the upgrade, and so far ETH certainly seems to be in a rallying phase. With the network processing a meaningful number of withdrawals, the withdrawals are happening steadily, following a sharp outflow on 15th April, according to Nansen and the cumulative sum is trending towards withdrawals.
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<source: nansen>
On the other hand, this has also aided the liquid staking protocols and their governance tokens. Top players in the LSD (liquid-staking derivative) have also been rallying, with Lido (LDO), Rocket Pool (RPL) and Frax (FXS) surging 4%, 15.2%, 16.1% and 19.2% respectively at the time of writing since the upgrade.
Ethereum’s exit queue is live and full of stakers looking to withdraw. At the time of analysis, there was 910k ETH across 28k validators in the queue, representing 4.9% of the validator set. Kraken represents the vast majority of exits (currently 43.4%) to comply with SEC’s order to shut its US staking operations. A majority of these clients (likely proportional to other providers), however, will probably re-stake as the settlement did not alter the underlying benefits of ETH staking.
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<source: nansen>
Lido has stated that they will not have withdrawals enabled until May at the earliest, pending deployment to testnet and the completion of several outstanding security audits. This could lead to losing some of their market shares to other players in the market.
Coinbase’s staking program, which allows users to mint their cbETH staking derivative makes up 13.7% of the exit queue, representing a further 126k in full Ether withdrawals. According to Dune Analytics, cbETH minting is seeing an uptick, following sharp redemptions of 48k between 12-14 April.
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<source: dune>
As we can see, both the market and on-chain participants have been keeping busy post the Shapella upgrade. Prices have surged with ETH rallying above $2100 carrying liquid-staking, LSD-Fi, and L2 tokens along with it. According to TokenUnlocks, only 5% of the stakers have actually pulled out their entire stake (principal) and the remaining 95% of withdrawn ETH were accumulated rewards accrued from their staking, rather than their principal.
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<source: token unlocks>
Going forward, the Ethereum community is focusing more aggressively on scalability and expects the next significant upgrade to take place in 2024, with Vitalik reportedly stating that “if we don’t fix scaling before the next bull run, people are going to be stuck paying $500 transaction fees” (The Defiant). Further upgrades will support the burgeoning layer 2 scaling ecosystem which has already begun to see significant traction from both a user perspective and as a % of gas consumed on Ethereum layer 1.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.