*Only 2 days left, the Shanghai upgrade will take place and **more than 18 million ETH (approximately $32 billion) ** being staked will, in theory, be released. So do we need to panic? Let’s analyze together* 1. ETH will be “unlocked” according to Ethereum’s automatic scanning mechanism. Scan once a week. One time takes about 4.6 days. (Figure 1) 2. In **first week**, will scan all ETH rewards accumulated so far (approximately 1.1 million ETH ~ $2 billion). 3. However, currently **53% of validators ** are using **liquid staking** mechanism, ie ETH reward has been distributed as a derivative token and circulated in the market for a long time –> only and 47% ETH reward ~ **530k ETH ~ $954 million** will actually “discharge” to the market. 4. From **2nd week onwards**, ETH from validators who want to withdraw all starts to be processed (32 ETH/ validator). The maximum processing speed is 1800 validators/day. That is about **403k ETH/week** ~ $725 million (not about 57k ETH/day, but depending on automatic scanning, whoever scans will be withdrawn, but total 1 week is 403k). 5. Currently only about **1200 validators** want to withdraw all of them. But the worrying thing is that from **Kraken**, the centralized exchange in the US has just been stopped by the SEC for staking services (Kraken is not liquid staking, so the withdrawn ETH will really affect the market). 6. Kraken has about**39,000 validators**. The processing time for all these validators is approximately 3 weeks. 7. So the amount of ETH withdrawn (in the worst case) in weeks 2, 3, 4 will be the maximum, $725 million. So, the total week 1 + 2 + 3 + 4 is about **3.2 billion dollars**. (figure 2) *Oke now you know how much ETH will actually be withdrawn, so** is this $3.2 billion ETH worth worrying about?*** 8. **No**. Because ETH’s liquidity is **70 billion USD/week**. If you withdraw 1 billion dollars per week, it only accounts for about 1.4% of the liquidity. That is, if the current liquidity level and good market conditions are maintained, the ETH price will only decrease **1.4%/week**. ***So what’s the other risk?*** 9. More validators want to withdraw than expected, meaning that $725 million is withdrawn each week not only at week 4, but continuing to last longer. Later. Cause ETH price to drop deeply –> **panic sell**. Know that currently about 24% of validators are making 20% or more profits and are not using liquid staking. (Figure 3) 10. **Buy rumors, sell news**. After the Shanghai update, Ethereum ran out of good news to pull prices + macro market conditions were not good (eg FED continued to raise interest rates, banks went bankrupt) –> ETH fell. You can review the price movement of ETH before and after The Merge as well. (Figure 4) *Is there another driver for the price increase? **Yes,** **ETH bullish potential is still there, but long term**:* 11. **Psychological knot is removed**: before Shanghai upgrade, many people fear ETH cannot be withdrawn. However, after a successful upgrade, they will rest assured to buy ETH to stake. 12. **High demand for ETH on Layer 2**: The recent wave of Layer zkEVM and massive airdrops spurred demand to buy ETH for gas fees. The amount of transactions on Layer 2 increased sharply (Figure 5), the amount of ETH burned was also more -> ETH is deflation (Figure 6). 13. **Ethereum is the blockchain with the lowest stake rate** among the current prominent blockchains, only about 15% (figure 7) –> room stake is still very much –> many people will continue to buy ETH to stake. 14. In the future, **pro-danksharding** update will take place (scale Layer 2 to 100x), turning Ethereum and Layer 2 into a fast – complementary – cheap network –> More people use ETH ***Conclusion:*** 15. If you are a trader, you should sell ETH to wait for the price reaction. If you are a holder, then just ignore it because the potential of Ethereum is still a lot
Source: Collector
