On April 12, 2023, Ethereum successfully completed its highly anticipated Shapella upgrade. This upgrade has been in the works for some time and is part of the blockchain's transition from proof-of-work to proof-of-stake consensus mechanism. The upgrade aims to make staking more accessible and reduce gas fees during periods of high activity, benefiting Ethereum developers.
The Shapella upgrade is a combination of the Shanghai and Capella upgrades, which have been the highlight of the Ethereum community since the transition from PoW to PoS.
The upgrade also aims to reduce gas fees during periods of high activity, which will benefit Ethereum developers. The Shapella upgrade has been designed to make staking more accessible, and its successful completion has been seen as a significant milestone for the Ethereum network.
The upgrade allows validators to withdraw ETH that have been staked since December 2020.
Approximately 15.6% of all ETH were staked, and the upgrade has effectively unlocked $36.4 billion in staked ETH, according to stakingrewards.com.
This has made more ETH available for developers and innovators who seek to build new applications running on the Ethereum blockchain.
Experts predicted that the upgrade would have an impact on the ETH price. Validators were previously required to stake 32 ETH with the blockchain. As validators can finally unlock all of their staked ETH, experts warned that they have the option to exit the chain completely with unstaked ETH. This could flood the exchange with ETH, pushing down the price.
Coinbase and Binance, two major crypto exchanges, have allowed users to withdraw staked ETH via their platforms since the upgrade. Coinbase reported $28 million more sell orders than buy orders for the ETH-USD trading pair after the upgrade. On the other hand, Binance allowed users to withdraw ETH on April 19, which could result in more sell pressure for ETH.
According to data from CryptoQuant, crypto exchanges received a net inflow of 179,500 ETH, worth $375 million in the four days after Ethereum's Shanghai upgrade went live.
Traders deposited 1,101,079 ETH to exchanges in three days following the upgrade and withdrew 921,579 tokens, making it the largest four-day net inflow in a month. The transfer of tokens indicates that buyers are about to sell, which may lead to a price decline. However, it remains to be seen as not all exchanges have allowed withdrawing ETH.
At the time of writing, ETH is trading at about $1 983, up 74% this year. Its dominance stood at 19.18%, while its 24-hour trading volume dropped 0.59% to $9.22 billion over the previous day.
While there are concerns about the potential impact on the ETH price and volatility, the overall sentiment among investors seems to be positive as many state that the ETH gas fees are far too high and create a large barrier to entry for smaller investors.