Are stakers selling their Ether after the Shanghai update?

Tonight, the Ethereum Shanghai upgrade goes live.

Tonight the Ethereum Shanghai upgrade goes live. Early investors will get access to their staked Ether for the first time. The total value? About $37 billion. Are we going to see a mass sell-off, and what will this mean for the Ether price?

Tonight it’s here: Ethereum stakers will finally get access to their Ether, which has been locked since December 2020. The upgrade, known as Shanghai or Shappella, gives stakers the option to withdraw about 18.2 million staked Ether from the Ethereum Staking Contract. Many in crypto fear a surge in selling pressure from Ether that unlocks. However, looking at the on-chain data and the staking withdrawal rules set out in the Shanghai Code, it seems to be more or less manageable.

How much selling pressure can we expect for Ethereum?

After the Shanghai update, Ether can be unstaked for the first time. Since 2020, stakers have locked up certain Ethereum to validate the network. Of course, they were rewarded for it. The Shanghai Update distinguishes between ETH from staking rewards and ETH that each of the 566,000 validators had to stake to run a validator. The first can be withdrawn quickly; the second gradually.

According to estimates from crypto analytics firm Delphidigital.io, the maximum selling pressure from these sources could be about 288,000 Ether in the first days after Shanghai, equating to roughly $550 million per day, based on the current ETH price. However, it seems unlikely that all stakers will sell their rewards right after Shanghai.

More important for Ethereum’s long-term trajectory is how the Ethereum validators will behave after the update. In principle there are two scenarios that will decisively shape selling pressure after Shanghai: investors stake more Ether, a bullish mood. In a Bearish mood, validators cash out their Ether.

You may ask: why would investors stake more when rewards are released? Unlike the last three years, the successful Shanghai upgrade reduces downside risk. That’s because the staked Ethers (due to the upgrade) are no longer locked up indefinitely. People can withdraw the rewards whenever they want. From many investors’ view, ETH could become a more attractive investment because of that.

What do the on-chain figures say?

A look at on-chain data from Metrika.co shows that currently only 43 percent of all ETH validators are eligible to sell their staked Ether right after Shanghai.

Moreover, according to Glassnode, currently only 0.9 percent of all Ethereum validators have decided to sell all their Ethereum staking as quickly as possible to Shanghai. What the Ether price will actually do? We’ll find out tonight and tomorrow.