Important takeaways
- 15% of the ETH supply had been locked until the Shanghai upgrade was completed on Thursday
- However, there was no added selling pressure with ETH leading the crypto market, up 4.6% today
- ETH has broken through the $2,000 barrier for the first time since May 2022
Ethereum traders woke up for the first time in a long, long time this morning with the ability to…sell theirs ETH.
The Shanghai upgrade has been completed, meaning that all staked Ether – some of which has been staked since 2020, when ETH was below $400 per token – is now available for sale.
A common discourse before the event was whether increased selling pressure would flood the market. I analyzed this myself last monthwith the market long debating what the unprecedented event would do.
But after about 16 hours – the upgrade was completed at 22:42 UTC on Thursday – ETH has given an emphatic response, not only resisting the downward pressure, but leading the crypto market, up 4.6% since the upgrade.
Nothing spectacular, but on what amounts to a fairly flat day for the market across the board, a 4.6% jump since the upgrade is interesting.
Of course, not all Ether was completely locked up. Liquid stake derivatives were widely available, allowing players to receive tokens in exchange for their staked ETH which could then be traded as proxies, giving them liquidity – with the promise that the derivative token could be redeemed 1:1 when the upgrade went live.
This fact, in addition to the fact that the upgrade has long been priced in, ultimately combine to alleviate any pressure on price.
How much Ether was in the stake contract?
But having full liquidity again makes a difference, and there had been speculation in the market about what this could do to the price. When the upgrade went live, a whopping 18.2 million ETH was locked up – priced or not, that’s a huge chunk.
Compared to the total supply, this means that over 15% of the supply was locked … and then suddenly available for direct sale.
The holding period here is particularly interesting. The earliest participants locked up their ETH in late 2020, when ETH was trading below $400. They then watched it rise close to $5,000 per token before collapsing below $1,000. And all this time it was locked.
It’s a rollercoaster with many peaks and valleys in between. Although many argued that the early movers were interested in the technology, less interested in the price. Then again, we’re all human at the end of the day, right?
Ether breaks $2,000
Not only have fears of selling pressure proven unfounded for now – although that could still change – but Ethereum breached the $2,000 mark for the first time since May 2022. That was the month the crypto industry was thrown into a tailspin, as the LUNA death spiral . to zero and takes a large part of the ecosystem with it.
It is probably not a stretch to say that the Shanghai upgrade has come at a good time. Had the upgrade gone live last year, as the panic and fear were extreme and prices collapsed across the board, it could have been a different story.
Can you imagine if 15% of the ETH supply suddenly went live a week after FTX collapsed?
Instead, the upgrade came amid a buoyant period for crypto as a whole. Bitcoin is above $30,000 for the first time since last June, now up 83% year-over-year. Ether itself has given inventors a 66% return to date.
Obviously, these gains are coming from decimated levels, and Ethereum is still a pretty nasty 60% off its November 2021 all-time high of $4,891, just as it ended before the $5,000 barrier.
It may be a while before ETH gets back there – if it ever does, who’s to say in the crypto market? – but regardless of the price effects, the Shanghai upgrade is an important step for the ecosystem as a whole.
It had been delayed many times – originally intended to be part of the merger, formerly known as ETH 2.0, which itself was pushed back several times. But now it is in the back window, and ETH can continue to develop. Basically, the upgrade has been a success, just as the merger was last September.
However, crypto prices depend on much more than that – and they do far from science – and the macro environment remains challenging, although rate hikes may be coming to an end, with the overall picture brighter than a few months ago.
This is still a difficult time. But, at least for today, there is reason to smile for ETH investors.
