What happens after the Shapella upgrade?

The feared "staking apocalypse" in the wake of the Shapella upgrade on Ethereum apparently didn’t materialize.

The predicted "staking apocalypse" in the wake of the Shapella upgrade on Ethereum apparently didn’t come to pass. Almost two weeks in, we’re taking stock.

Many expected a big sell-off in Ethereum in the wake of the Shanghai upgrade (later Shapella), as investors gained access to staked ETH worth about $37 billion for the first time since 2020. The sheer amount of unlocked coins was seen as a recipe for massive price volatility. So far, the trouble hasn’t shown up. A look at on-chain data (according to Nansen) explains why: currently, only 4.5 percent of the withdrawable coins are waiting to be paid out. In other words, more than 95 percent of stakers aren’t planning to cash out right now.

Central crypto exchanges losing ground

Every ETH staker who wants to withdraw their stake plus rewards from Ethereum’s staking mechanism first goes into a queue. This helps determine where withdrawals are coming from (to date, the withdrawals have been relatively modest). It’s clear that the bulk of withdrawals are coming from centralized crypto exchanges. And it’s probably not voluntary.

Until recently, Kraken accounted for the majority of these withdrawals; now it’s Binance and Coinbase. All three have run-ins with U.S. authorities this year. Kraken, for example, was forced by the Securities and Exchange Commission to shut down its staking services. The hard line from Gary Gensler’s agency is echoing here. Binance and Coinbase also seem to be acting cautiously and pulling back their stakes amid regulatory uncertainty.

And it’s not just the exchanges themselves; it’s their customers, too. Because decentralized staking providers have been drawing in new users in recent days. This suggests customers are taking their coins off exchanges and staking with more decentralized protocols like Ether.fi.

No staking flight

The data point to a healthy evolution in Ethereum’s staking landscape. Users are increasingly recognizing the regulatory risk of staking at centralized exchanges and are turning to decentralized alternatives. There are also higher yields there. The Shapella upgrade clearly boosted confidence in Ethereum. That’s reflected in validators, on nearly every day except a few isolated days, net depositing more than they are withdrawing.

The initial wave of withdrawals also shows that validators were mostly cashing out rewards rather than exiting their stake entirely. For them, there seems to be little reason to pull completely from staking. For many stakers, it was probably more about securing long-locked rewards.

Occasionally there are still full withdrawals. However, so far these represent only a small portion of what remains on chain. Some of these are certainly exchanges closing services or users exporting their entire stake from one service to another. Such spikes are likely to ease as we move forward.

Cancun upgrade on the horizon

Ethereum is now a full proof-of-stake blockchain. After the upgrade, users have clear certainty they’ll get their coins back (plus interest) after staking. That should spur a new rush of stakers. Currently, just under 15 percent of all possible ETH is staked. Competitors like Cardano or Solana have between 60% and 80%. If Ethereum moves toward similar figures, the circulating supply would shrink meaningfully, which could positively impact ETH price if demand stays the same.

Meanwhile, developers are already looking ahead to the next upgrade: the Cancun hard fork or EIP-4844. It centers on scaling the blockchain via proto-danksharding, spreading network load across sidechains like Arbitrum and Optimism that are being optimized in tandem. Ethereum’s Layer 2 solutions could become 20x cheaper and faster. Developers plan EIP-4844 for the third or fourth quarter of this year, barring delays.