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- Just 35% of ETH deposits are profitable ahead of Ethereum’s Shanghai upgrade.
- The majority of stakers have deposited ETH at rates greater than the current market price.
- The positive effects of Shanghai on ETH will be more than the offset initial selling pressure in the long run.
According to a recent report from data analytics company, Nansen’s research ahead of Ethereum’s Shanghai upgrade, just 35% of ETH deposited is now profitable. The report states that 56% of illiquid stakers on Ethereum are in profit, while only 22% are liquid stakeholders. This suggests that the vast majority of stakers have deposited ETH at rates greater than the current market price and hence are not expected to create heavy selling pressure.
The ETH Shanghai upgrade is a planned hard fork allowing ETH investors to unstake their holdings for the first time. As a result, there have been fears that the staked ETH release may result in a flood of these tokens into the market, creating significant selling pressure.
According to Nansen, the initial wave of withdrawals following Shanghai would likely take 3-4 days for partial withdrawals and 3-8 weeks for full withdrawals. This is predicated on the premise that 10% of ETH invested will be withdrawn within 24 hours of Launch.
In this situation, the unstaking selling pressure on ETH would be $1.9B-$4.6B. According to Nansen, given the current low liquidity of ETH spot markets, this might have a detrimental pricing impact. Nevertheless, the research adds that other variables, including, increasing demand for ETH owing to decreased supply and higher fees burnt, may counteract this effect.
Nonetheless, the firm estimated that, in the long run, the positive effects of Shanghai on ETH would be more than offset the initial selling pressure. The report cites numerous reasons for this optimism, including better Ethereum scalability, security, and sustainability; increasing DeFi and NFT usage and innovation; and reduced censorship risk owing to decentralization.
Crypto analytics platform CryptoQuant has expressed similar sentiments. According to a report, selling pressure is often significant when investors have the possibility for extraordinarily big returns. When a significant number of assets are unstaked at the same time, it is common for some investors to desire to cash out their winnings, creating selling pressure. Since Ethereum investors have limited profit possibilities, strong selling pressure is unlikely.
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