Ethereum Shanghai upgrade will enable ETH withdrawals for users who staked their tokens from as early as December 2020.

ETH selling pressure could be limited by reduced stakers, a steady withdrawal process, and 60% of the altcoin being liquid.

LSD tokens have spiked since the announcement of the launch date, but the rally may be seasonal.

Dune analytics shows that Ethereum has over 16.3 million Ethereum staked on the network but cannot be withdrawn. The Shanghai upgrade, slated for April 12, 2023 at around 10:27:35 PM UTC will change this, allowing Ethereum stakers, including individuals and larger staking outfits to withdraw their staked ETH freely, something that is currently impossible.

The Shanghai/Capella upgrade, christened Shapella, the upgrade will enable ETH withdrawals for various users who staked their Ethereum on the network as early as December 2020. After withdrawals are enabled, experts say it will reduce the risk of holding the staked versions of Ethereum, including Lido’s stETH and Frax’s frxETH because they will finally become redeemable.

What will happen to Ethereum price post-Shapella

Investors should expect one cohort of investors to want to cash out on their staking positions for more funds, a move that will see them exit from the Beacon Chain. Even if validators withdraw and sell their digital assets, they will want to maintain their staking balance for more yields. With reduced risk, more Ethereum holders could feel motivated to stake with liquid staking derivatives (LSD) for increased yields.

The case for selling pressure

Stakers will not be able to withdraw all staked Ethereum at once. There will be a withdrawal process, with holders being able to withdraw their rewards directly. This would represent $1.03 million ETH, equivalent to $1.8 billion at current rates. Given that Ethereum’s daily volume ranges between US $8-10 billion, chances of negligible selling pressure are high.

Moreover, considering the amount staked per validator cannot be withdrawn directly because of the 50,400 ETH per day limit ($85M at current rates), this is a negligible amount compared to the token’s daily volume. Chances are very high, therefore, that the price will not be too impacted given the low seller pressure that is also diluted.

The case for buying pressure

As regards buying pressure, given that staking rewards are inversely proportional to the number of validators, if the number of validators reduces, presumably because of validators withdrawing their ETH, rewards will surge and attract other validators. Given ETH is now deflationary, however, we expect more buying pressure compared to selling pressure.

If Ethereum holders refrain from selling their tokens and instead buy and hold indefinitely, the equilibrium Ethereum price could rise because the quantity supplied will reduce.

Buying pressure could therefore increase due to validators existing, which will cause rewards to increase thereby drawing in more investors. Secondly, incumbent stakers are expected to show more optimism, and finally, the idea that ETH is now deflationary will inspire buyers.

Liquid staking derivatives pumping before the Shanghai upgrade

Following the latest announcement from the Ethereum Foundation, Liquid staking derivatives like Lido DAO, Frax Shares, and Rocket Pool have spiked. These LSDs were designed to make staking easier as they do not require a minimum deposit to become a staker. The gains for the native tokens of these staking projects, LDO, FXS, and RPL, respectively, outperformed Ethereum price that surged 5.5% in the last 24 hours. LDO surged 18.6%, RPL 13.3%, and the FXS 20.4%, based on data on Coingecko.

The surge pre-upgrade comes as Shapella will help bypass high-entry barriers such as the 32 ETH threshold, need for technical node-operating knowledge, and withdrawal queue. After April 12, users will be able to stake easily through LSDs which could lead to a boost in total value locked (TVL), on-chain activities, and ultimately valuation of these protocols.

Notably, the above protocols allow users to deposit whichever amount of Ethereum and stake. When you deposit directly on the mainnet, you need a minimum of 32 ETH to participate. Depositing into a staking project earns you a “staked” version of ETH (stETH), which accrues staking yield and surges as a receipt of their deposit.

Possible impact of Shapella on LSDs

LSD protocols not only unlock the value of staked tokens but also gives users the opportunity to earn staking rewards. They also use the derived value of their staked tokens on other protocols. Conversely, being able to unstake your tokens post-Shapella makes the validator lose out on the staking rewards. This means that LSDs will remain relevant. 

Also, with the news of regulating centralized exchanges (CEXs) and restricting them from staking, after the Shanghai upgrade, we might notice a huge withdrawal of coinbase ETH. However, it remains to be seen whether these users will move to another LSD protocol or if they will sell off.

Moving to Lido may threaten Ethereum protocol due to centralization risks. For the meantime, investors should expect a more positive run for Ethereum-based LSDs as the Shanghai upgrade builds confidence in users that they can unstake their ETH whenever they want.

#ETH #ethereumshanghaiupgrade #ldo #crypto2023 #Binance

In the fast-paced world of cryptocurrencies, Lido DAO (LDO) has made significant waves in the past week, experiencing an impressive surge of nearly 20%. Though the surge comes at a time the global crypto market is not deep in a downtrend, Lido’s current rally can be attributed to two notable factors.

Over the past seven days, LDO has recorded a significant spike, up by 16%. The asset has picked up from trading at a low of below $2 as of May 9 to trading at a high of $2.25, at the time of writing. Meanwhile, over the past 24 hours, the rally continues as the asset is currently up 6.3% with an increasing trading volume.

Whale Accumulation Fuels Lido’s Surge

One possible catalyst for Lido’s remarkable performance over the past 7 days is the increased buying activity by cryptocurrency whales. According to a recent report by Onchain analyst Lookonchain, three whale accounts have been observed accumulating LDO tokens.

Notably, these whales have been seen transferring their LDO assets from centralized cryptocurrency exchange Binance to personal wallets, indicating a deliberate accumulation strategy. The magnitude of these whale transactions is noteworthy.

For instance, one address withdrew a substantial amount of 724,822 LDO tokens, valued at approximately $1.52 million, from Binance for $2.01 per token. Another whale withdrew 655,641 LDO tokens, equivalent to $1.38 million, from Binance at $1.83 per token. Additionally, a third whale purchased 570,883 LDO tokens using 974,000 USDC for $1.71 on May 12.

This influx of capital from these significant players in the market has undoubtedly contributed to the surge in Lido’s value.

Lido V2 Launch Amplifies Momentum

Another driving force behind Lido’s recent upward trend is the launch of Lido V2. This highly anticipated upgrade brings several notable features to the Lido DAO ecosystem, enhancing its appeal to investors and participants. A key highlight of the V2 release is the ability for users to withdraw their staked Ethereum (ETH).

With the new Withdrawals page, Lido users can easily deposit their staked Ethereum tokens, such as stETH or wstETH, and receive ETH in return. Lido has streamlined the withdrawal process, reducing the withdrawal period to as short as 1-5 days.

This improvement not only enhances the liquidity and accessibility of staked Ethereum but also provides users with greater flexibility and control over their assets. Additionally, the V2 upgrade introduces a modular staking router, which promotes staking diversity among several cohorts.

Solo stakers, decentralized autonomous organizations (DAOs), and Distributed Validator Technology (DVT) clusters can now participate in staking activities through Lido, further expanding the network’s staking capabilities.

LDO’s price has already risen nearly 20% since the upgrade, with a market currently above $2 at the time of writing. Alongside the price surge, Lido DAO’s market capitalization has also experienced a notable rise. The market cap moved from $1.4 billion last Friday to $1.9 billion today.

Moreover, the trading volume of LDO has also witnessed a significant uptick over the same period indicating the increasing accumulation of the asset. Lido’s trading volume has surged from $47.4 million last Friday to more than $104 million in the past 24 hours.

#ldo #lido #crypto2023 #Binance