The Ethereum network native token gained significant momentum following a successful network upgrade known as Shanghai or Shapella, which allows users who have staked their Ether to withdraw it, a process that helps secure and validate transactions on the blockchain.
Ether, the second-largest cryptocurrency by market value, has risen to $2,003, marking its highest point since August. This rally was brought on by the successful implementation of the Shanghai upgrade, which allows withdrawals for users who have staked their ether. This process helps secure and validate transactions on the blockchain.
During the initial hours after the upgrade went live, ether traded fairly flat, but since then, it has gained over 3%. In contrast, market leader Bitcoin has added less than 2%, and the ether-bitcoin ratio has risen over 2.5%.
Analysts were divided on how the backward-incompatible upgrade would influence ether’s price, with some anticipating an investor rush to liquidate holdings. However, the selling pressure is likely to be less than what the market initially feared, according to North Rock Digital’s founder Hal Press.
The demand for unstaking ether has been moderate, as a sizable portion is currently held at a loss. The biggest unstaker so far has been Kraken, which is shutting down its staking service for US users as part of a settlement with the Securities and Exchange Commission.
“Over 77% of ETH being withdrawn has been from the exchange Kraken and the majority of withdrawn ETH by validators outside of this is rewards, not rewards plus original stake. This is a more constructive than the market had potentially anticipated,” said Lewis Harland, portfolio manager at Decentral Park Capital.
“With withdrawal restrictions in place and liquid staking derivatives like Lido not implementing withdrawals until May, we think the market is realizing they over indexed on the upgrade concerns allowing for ETH to finally test the $2,000 level once again,” he added.
Liquid staking solution Lido makes up around 31% of all ether deposits. So far, 108,402 ETH have been unstaked, according to data source Nansen. This indicates that the market is rebalancing towards ether, which could result in further price appreciation. According to David Brickell, director of institutional sales at crypto liquidity network Paradigm, “We’re seeing a ‘sell the rumor buy the fact’ redux.
ETH underperformed BTC with uncertainty around the upgrade and potential supply dynamic from the unlock. Now the risk event has passed, no substantial selling pressure, the market can unwind short hedges and rebalance towards ETH.”