Ethereum Shanghai Upgrade Live: 4.4M Fresh Ether Staked Since Shapella

Key Takeaways:

• The very highly anticipated Ethereum Shanghai Capella upgrade has finally gone live on the Ethereum mainnet, at around 10:27 pm, UTC on April 12 – at epoch 194048.

Hi Shapella 👋

Withdrawals have appeared! pic.twitter.com/POqeZwkZJ4

— Etherscan (@etherscan) April 12, 2023

• The Ethereum Shanghai Capella Upgrade has now effectively unlocked $34.89 Billion in Staked ETH, according to data from stakingrewards.com.

Source: stakingrewards.com

• In the more latest news from the Ethereum Shanghai Upgrade, the amount of Ether staked post the Ethereum Shanghai Capella Upgrade has surged by more than 4.4 million ETH!
• According to data sourced from crypto analytics platform Glassnode, more than 4.4 million coins have been deposited into the staking contract since April 12, 2023 – the day the upgrade went live. This took the tally to 22.58 million ETH!
• The most optimistic matter in this scenario is that this is occurring despite the fact that there is a series waiting time before a user can become a validator on the Ethereum network. As of writing this article, newer Ether holders looking to become a validator on the PoS Ethereum would have to wait for over 38 days, according to data source wenmerge.com.

Source: wenmerge.com

• The date for the final execution of the Shanghai Upgrade on the Ethereum mainnet had been pushed back a month to April, thanks to delays during the Sepolia testnet execution but now has been finalized.

So, What is Ethereum Shanghai Upgrade?

In one of the biggest announcements by Ethereum since the Merge itself back in September 2022, Ethereum developers have finally executed the mainnet release of the Ethereum Shanghai Capella upgrade. The Shanghai-Capella upgrade, also called Shapella, is an upgrade to the network that is aimed mainly to enable ether (ETH) withdrawals from the deposit contract. Ever since the launch of the PoS-based Beacon Chain back in December 2020, those who wanted to become validators on the new Ethereum 2.0 network had to stake 32 ETH or more to the network which was locked for an indefinite period of time.

Finally, with the hard fork now in place on the Ethereum mainnet, thanks to the EIP-4895 – withdrawals of staked ETH tokens have now been activated on the mainnet!

On the Ethereum All Core Developers Execution (ACDE) Call on March 16, it was announced that the Shanghai hard fork on the Ethereum mainnet would take place on April 12, 10:27 pm (UTC) at epoch 194048.

While EIP-4895 is one of the most highlighted features of this upgrade, there are a host of other smaller EIPs that are in line too. These other improvements have been made with the objective to reduce gas fees during periods of high activity to aid Ethereum developers. These EIPs include EIP-3651, which proposes lowering gas costs related to the Maximal Extractable Value payments while accessing their COINBASE address (not the exchange, but the software that enables developers to receive new tokens), EIP-3855, which aims to bring down overall gas costs, and EIP-3860, which aims to cap developer gas costs in select cases among a few others.

Additional read: Ethereum Improvement Proposals Explained

Why is Ethereum Shanghai Upgrade Important?

Well, it is important due to several reasons and I will list them for you below. However, it must be noted that these are calculated assumptions made with the available data. We will keep this section updated as we get more information regarding the upgrade.

Gas fees: One of the biggest things that the Ethereum Shanghai Upgrade is expected to bring about is to reduce gas fees for layer-2 solutions running on top of Ethereum, for example, Polygon, Optimism, and the like. These Layer 2 solutions make using Ethereum faster and cheaper and this upgrade could potentially make it even cheaper to transact on the Ethereum blockchain.

Withdrawal of staked ETH tokens: So ahead of the Ethereum Merge, all those who were interested to become a validator in the new PoS Ethereum Beacon chain, had to stake a certain amount of ETH to a deposit smart contract which was locked in with the contract even after the Merge happened. But now with the Shanghai Upgrade, we may see the lock-in be released and those who had staked their ETH tokens may be able to unstake them.

Updates to smart contract facilities: This is another important update that can be expected out of the Shanghai Upgrade. Ethereum being the single largest smart contract-capable blockchain network has to stay ahead in terms of development.

Read more: Ethereum Virtual Machine Explained

How will Ethereum Shanghai Upgrade affect ETH prices?

Continuing from the above thought – if you are a trader or an investor in the ETH token, the story changes a little bit. While it cannot be said for certain, the implementation of EIP-4895 could have certain ramifications on the price of the token. This is because according to data from Staking Rewards, 15.6% of all eligible ETH tokens have been staked.

With staking withdrawals opened up, this could amount to significant liquidity flooding back into the open market, putting some downward pressure on ETH prices. However, that is assuming that the entirety of the ETH tokens are immediately pulled out and sold off – which in retrospect seems highly unlikely. Thus, for traders and investors, keeping a vigilant eye on the percentage of ETH coins staked would be sound advice. 

On the other hand, things could also move in the opposite direction as ETH could become more attractive to users due to its improved liquidity. Those who didn’t want to go via liquid staking protocols would now have a chance to directly stake ETH with Ethereum. 

However, one overarching positive thing that can be taken out of this is that while locking up coins is a means to make the process more secure, it could be also looked at as a means of artificial control and thus a removal of that cap could bring about more balance and equilibrium in the market. 

Ethereum Price Action in 2023

ETH/USD | Source: TradingView

In a couple of days following the Ethereum Shanghai Upgrade going live on the mainnet – the price of its native token, ETH saw a nearly 12% rally over the course of the next three days. But amid slightly bearish market sentiments and heavyweights like Bitcoin and other tokens weighing down on the market – ETH price too lost all the gains it made in those three days. Over the course of the next four weeks, ETH went on correcting, until it finally broke down below its 50-day exponential moving average.

ETH price also broke down below its upward trend that it had managed to create since the beginning of 2023 (marked with a diagonal blue trendline). However, on the positive side, despite the correction, ETH price has managed to sustain above the crucial support level of $1700, which is a long-term support level for the altcoin king. Thus, as long as the token is able to sustain there, a recovery in the overall market sentiment will help to push ETH price back up! Further, the reasonable Relative Strength Index value of 46 will also support any upward move from current levels.

Values as on May 24, 2023.

Additional Read: Ethereum Price Prediction 2025

How is ETH Shanghai Upgrade going to Affect Investors?

As discussed in the article above, the Ethereum Shanghai Upgrade was one of the most awaited developments to take place on the Ethereum blockchain network. Now there are a couple of reasons why this was so highly anticipated, especially after the Ethereum Merge that took place last year on September 15, 2022 – however, there is one that is definitely going to take up headlines in the space.

What does Shanghai Upgrade mean for validators?

Simply put – the Ethereum Shanghai upgrade, specifically the EIP-4895, now allows ETH stakers to remove their staked funds as validators. This is significant because back in December 2020, when the proof-of-stake Beacon chain was launched – participants on the Ethereum network who wanted to be a part of Ethereum 2.0 as validators had to stake a minimum of 32 ETH tokens which was practically going to be locked up for an indefinite period. Once you had staked the 32 ETH tokens, these validators weren’t allowed to pull their funds out whenever they wanted to.

Now, this begs the question – what effect will this move have on you? Well, that actually depends upon the situation you are in, or rather the kind of participant you are on the Ethereum network. If you are simply a validator on the Ethereum PoS chain, you will now be able to pull out your staked ETH tokens and sell them off if you wanted to. There are mechanisms in place to ensure there isn’t a sudden deluge of ETH tokens supply in the market, but we can expect to see a lot of rewards and tokens being redeemed now that the withdrawals have been activated. 

CoinDCX will support the Ethereum Shanghai-Capella Upgrade

CoinDCX crypto exchange platform will be supporting the Ethereum Shanghai-Capella Upgrade that is slated to take place on April 12 (UTC). For traders on the platform, CoinDCX will be pausing all deposit and withdrawal services for ETH and ERC-20 tokens for supporting the Ethereum network’s Shapella (Shanghai + Capella) upgrade on 12/4/2023. We will announce once the services are resumed. Thank you for your trust. Rest assured, there will be no impact on trading and the assets on the CoinDCX platform.

Additionally, traders should keep an eye on the price of ETH tokens on the day of the hard fork as we might experience increased volatility in the market. It would a good idea to use tools like watchlists and price alerts on the CoinDCX platform to stay on top of things!

Ethereum Upgrades: A Recap

Before we get into Ethereum’s Shanghai Upgrade, let’s recap what happened last year. On the 15th of September, 2022 – Ethereum – the largest smart contract-capable blockchain network underwent one of the biggest transitions to ever happen in any crypto in history. The Ethereum network underwent something called the Merge which transitioned this behemoth of a network, the second largest in the world by market cap – from a proof-of-work to a proof-of-stake consensus mechanism.

This is the first step in a long plan to transition Ethereum into the future, where gas fees are low, transaction speeds are high, at least at par with its competitors and eventually maintain its position as the biggest smart contract-capable blockchain platform out there.