Shanghai Upgrade and ETH Market
On the 14th, the major US crypto asset (virtual currency) exchange Coinbase released an analysis report on selling pressure after the upgrade of Ethereum (ETH) to “Shanghai”.
Coinbase is wary of the regulatory environment, but believes the selling pressure on ETH, freed from staking contracts, will be eased by daily withdrawal limits and offset by new buying demand. there is
Even though the regulatory environment has somewhat disrupted the outlook, we believe there are mitigating factors and self-correcting mechanisms to control the flow of ETH in the open market, and the selling pressure is fairly limited.
Ethereum plans to implement its first upgrade after the merge, “Shanghai,” in March-April 2023. At the time of writing, 16.5 million ETH (equivalent to approximately 3.5 trillion yen) locked up in the staking contract and staking rewards will be available for withdrawal for the first time.
Coinbase expects at least 350,000 ETH and a maximum of 1,145,000 ETH for withdrawals from the cryptocurrency exchange Kraken as one of the withdrawal demands for staking ETH after “Shanghai”.
Kraken, which suspends staking services in the United States due to a settlement with the U.S. Securities and Exchange Commission (SEC), accounts for about 7% (1.23 million ETH) of staking ETH, but foreign assets are also included. It’s a look.
Coinbase also reports that, at the time of writing, 340,000 ETH (70 billion yen) out of the rewards distributed to 516,000 active validators (approximately 1.03 million ETH) is another part of the withdrawal demand for staking ETH. I estimate that it will flow out to the market. The 640,000 ETH (67%) reward staked in the intermediary service is expected to be transferred to new stakes for compounding purposes.
Based on the above, a maximum of 1,145,000 ETH + 340,000 ETH may function as selling pressure in the market, but Ethereum has a maximum withdrawal amount for a certain period of time.
The conditions are different between “partial withdrawal”, which only targets staking rewards, and “full withdrawal”, which also withdraws rewards + validator requirements (32 ETH). Up to 118,000 ETH (13.8 billion yen) can be sold per day from sources (Kraken and reward withdrawals).”
According to the analysis firm TIE, the daily trading volume of ETH has averaged $8.2 billion (1 trillion yen) over the past 30 days, so the sales volume of 118,000 ETH is expected to be easily absorbed by the market. Yes,” Coinbase claimed.
connection:US SEC: Kraken’s cryptocurrency staking service violates securities laws
Stimulate staking demand
In reality, investors forced to withdraw on Kraken may resume staking elsewhere. Coinbase also noted a staking rate of 14% of the total supply of Ethereum, which is lower than the average for other Layer 1 blockchains (65%).
He said that it could increase the demand for ETH, as it will encourage institutional investors who have been interested in staking ETH but refrained from doing so due to liquidity concerns before the Shanghai upgrade.
Overall, we expect increased staking demand to offset forced ETH withdrawal volumes.
Like Coinbase, the Shanghai upgrade will cause some selling pressure in the short term, but many operators expect it to spur new staking demand in the medium to long term.
Matt Hougan, Chief Investment Officer of Shanghai Upgrade cryptocurrency index fund manager Bitwise Asset Management, said, “If the (de facto) indefinite lockup as we have done so far is lifted, investors seeking ETH staking will be able to The percentage will explode,” and predicted that by the end of 2023, the staking rate of ETH in circulation will rise by at least 50%.
Investment bank JP Morgan points out that 95% of Coinbase’s retail investors may participate in Ethereum staking after the Shanghai upgrade, and Coinbase’s annual revenue is now 225 million. It is estimated that it will expand from the dollar (29.5 billion yen) to 545 million dollars (70 billion yen).
connection:Ethereum Set Next Test Of Shanghai Upgrade To End Of February