Are Stakers Selling Ether After “Shanghai”?

It’s almost time: On Wednesday, Ethereum stakers will get access to their ether locked since December 2020 for the first time. With the upgrade known as Shanghai or Shappella, around 18.2 million ether staked be withdrawn from the Ethereum staking contract for the first time. Many in the crypto industry fear there will be high selling pressure from the released ethers. However, looking at the on-chain data and the rules for staking withdrawals set out in the Shanghai Code, no massive ETH sell-off seems imminent at the moment.

How high will the selling pressure for Ethereum become?

After Shanghai, ethers can be extracted for the first time, i.e. paid out – but with restrictions. A distinction is made between ETH from staking rewards and ETH from each of the 566,000 must deposit validators in order to operate a staking validator. The former can be taken off faster, the others only gradually.

According to estimates by crypto analysis firm Delphidigital.io, the maximum selling pressure from these sources in the first few days after Shanghai could be around 288,000 Ether, which at current ETH prices equates to around $550 million a day. However, it seems unlikely that all stakers will decide to sell immediately after Shanghai.

However, much more important for the long-term development of Ethereum than this estimate is how the number of Ethereum validators behaves after the merge. Basically, there are two scenarios that will play a decisive role in the selling pressure after Shanghai: Investors are staking more ether, which is to be considered bullish. Bearish, on the other hand, could be existing validators withdrawing their ether.

But why should investors stake more when withdrawals are allowed? In contrast to the last three years, the successful Shanghai upgrade reduces staking risk. This is because staked ETH is no longer locked indefinitely as a result of the upgrade. From the perspective of many investors, ETH could therefore become a more attractive investment.

That’s what the on-chain data says

A look at the on-chain data from Metrika.co shows that currently only 43 percent of all ETH validators are authorized to sell their staked ether directly to Shanghai.

In addition, have become noisy glass node currently only 0.9 percent of all Ethereum validators decided to sell all their staking Ethereum to Shanghai ASAP.

Expect this number to continue rising ahead of Shanghai as many validators want to take profits and minimize your risk. However, it would be surprising and bearish for ETH if this number spikes. That’s why you should keep an eye on this indicator ahead of Shanghai. In addition to the selling pressure from ETH from staking rewards, it is crucial for the short-term price development. It also reflects staking validators’ confidence in a successful Shanghai upgrade.