key takeaways
- 15% of the ETH supply had been locked up until the Shanghai upgrade was completed on Thursday
- However, there was no additional selling pressure, with ETH leading the crypto market, up 4.6% today.
- ETH has broken the $2,000 barrier for the first time since May 2022
Ethereum participants woke up for the first time in a long, long time this morning with the ability to… sell their ETH.
The Shanghai upgrade has been completed, which means that all staked Ether, some of which has been staked since 2020, when ETH was below $400 per token, is now available for sale.
A common speech in the lead up to the event was whether further selling pressure would flood the market. I analyzed this myself last monthwith the market long discussing what would make the event unprecedented.
But around 16:00, the update was completed at 22:42 UTC on Thursday, ETH provided an emphatic response, not only withstanding the downward pressure, but leading the crypto market, rising 4.6 % since update.
Nothing spectacular, but in what amounts to a pretty flat day for the market across the board, a 4.6% jump since the update is interesting.
Of course, not all of Ether was completely locked up. Liquid staking derivatives were widely available, allowing participants to receive tokens in exchange for their staked ETH, which could then be traded as proxies, providing them with liquidity, with the promise that derivative tokens could be redeemed 1:1 once they the update started.
This fact, plus the fact that the upgrade has been priced in for a long time, ultimately combined to ease any price pressure.
How much Ether was in the participation contract?
However, getting back to full liquidity makes all the difference, and there have been musings in the market about what this could do for price. As the update went live, there was a whopping 18.2 million ETH locked up, priced or not, that's a massive chunk.
Compared to the total supply, that means more than 15% of the supply was locked up…and then suddenly available for direct sale.
Particularly interesting is the waiting period here. The first entrants locked up their ETH in late 2020, when ETH was trading below $400. They then watched it climb close to $5,000 per token before crashing below $1,000. And all this time, it was closed.
It's a roller coaster with a lot of ups and downs in between. Although, many argued that those early takers were in it for the technology, less interested in the price. Then again, we're all human at the end of the day, right?
Ether breaks $2,000
Not only did the fear of selling pressure prove unfounded for now, although that could still change, but Ethereum breached the $2,000 mark for the first time since May 2022. That was the month the crypto industry launched. to the lurch, as LUNA's death skyrocketed. to zero, taking with it a large part of the ecosystem.
It's probably not a stretch to say that the Shanghai update has come at a good time. If the upgrade had gone live last year, when panic and fear were extreme and prices were crashing across the board, it might have been a different story.
Can you imagine if 15% of the ETH supply suddenly went live a week after the FTX crash?
Instead, the update came amid a buoyant period for cryptocurrencies as a whole. Bitcoin is above $30,000 for the first time since last June, now up 83% on the year. Ether itself has netted inventors a 66% return so far this year.
Obviously, these gains are coming from decimated levels, and Ethereum is still well below 60% of its November 2021 all-time high, when it hit $4,891, and ran out of steam before the $5,000 barrier.
It may be a while before ETH is back there; if it ever does, who is to say in the crypto market? – but whatever the price effects, the Shanghai update is a vital step for the ecosystem as a whole.
It had been delayed many times, originally intended to be part of Merge, formerly known as ETH 2.0, which itself was removed several times. But now it is in the rear view window, and ETH can continue to develop. Fundamentally, the update has been a success, just like the merger was last September.
However, the prices of cryptocurrencies depend on much more than that, and they are far of science, and the macro environment remains challenging, even if interest rate hikes may be coming to an end, with a brighter overall picture than a few months ago.
This is still a difficult time. But, at least for today, there are reasons for ETH investors to smile.
