The forthcoming Shapella software upgrade to the Ethereum blockchain is expected to unlock over $33 billion worth of ether, allowing investors to access their staked coins that have been locked up for the past three years. These coins have been earning interest as part of the staking process, which accounts for approximately 15% of all ether, or $33.73 billion in market value, according to Dune Analytics data.
Sreejith Das, CEO of Attestant, a company that facilitates ether staking, estimates that 1.1 million ether will become available for withdrawal in the week following the blockchain revamp. This equates to nearly $2 billion, based on the current ether price of around $1,860. Traders are now trying to determine the potential impact of this sudden influx of ether on market prices, with short-term volatility being the only certainty, according to Robert Quartly-Janeiro, chief strategy officer at crypto exchange Bitrue.
Some market participants fear that the release of staked coins may lead to massive withdrawals and a wave of selling, causing prices to plummet. However, Bundeep Rangar, CEO of blockchain investment firm Fineqia International (FNQ.CD), notes that only around 29% of all staked ether is currently profitable in dollar terms. Therefore, most of the staked ether would be sold at a loss, making it unlikely for a large-scale sell-off to occur.
The Shapella upgrade marks the end of a long wait for investors who have been staking ether since the project began in 2020. Ethereum developers initiated this change with the "Merge" upgrade last year, which transitioned the network from energy-intensive mining to a "proof-of-stake" system. In this system, ether owners lock up 32 coins to validate new records on the blockchain, earning additional ether on top of their staked coins.
Until now, investors staking ether had to deposit a minimum of 32 coins (worth $59,520 at current prices) for an indefinite period. This high investment threshold was out of reach for many average retail investors. After the Shapella upgrade, staked ether will no longer be locked up on the blockchain, potentially encouraging more investors to participate in staking.
Projects such as Lido Finance and Rocket Pool, which provide liquidity for crypto staking, have seen their market values surge in anticipation of further growth. CoinMarketCap data indicates that Lido Finance's value has increased nearly sixfold to $2 billion, while Rocket Pool's has quadrupled to $875 million.
Rangar of Fineqia believes that the long-term amount of ether staked will rise, particularly compared to the percentage of supply staked for other digital assets like Solana, Mathic, and Ada. Attestant's Das suggests that the institutions that have been waiting for the ability to withdraw their ether before staking it will likely enter the market following the Shapella upgrade.
