Ether climbed to $2,003 on Thursday, achieving its highest level since August. This surge to an eight-month peak follows the successful implementation of the Shanghai, or Shapella, network upgrade. The upgrade, carried out during Asian hours, allows users who have staked their ether to make withdrawals, a process that aids in securing and validating transactions on the blockchain. Ether's price remained relatively stable in the hours immediately after the upgrade went live.
Since the upgrade, the second-largest cryptocurrency by market capitalization has gained over 3%, while market leader bitcoin has increased by less than 2%, according to CoinDesk data. The ether-bitcoin ratio has risen over 2.5%.
David Brickell, director of institutional sales at crypto liquidity network Paradigm, told CoinDesk, "We're seeing a 'sell the rumor buy the fact' redux. ETH underperformed BTC with uncertainty around the upgrade and potential supply dynamic from the unlock. Now the risk event has past, no substantial selling pressure, market can unwind short hedges and rebalance towards to ETH."
Prior to the critical hard fork, analysts were divided on how the backward-incompatible upgrade would affect ether's price, with some predicting a rush by investors to liquidate their holdings.
However, North Rock Digital's founder, Hal Press, believes that the selling pressure is likely to be less than initially anticipated by the market. Press tweeted, "There was a large backlog of 15k [validators] waiting to enter the exit queue, which did so in a linear fashion. Now that they have been processed its flatlined. Puts us on schedule to clear the queue in ~2 weeks and is in line with my earlier estimate of ~$300m of total sell pressure."
He added, "This is still much more bullish than my baseline assumptions from a couple weeks ago."
The demand for unstaking ether has been moderate, as a significant portion is currently held at a loss. Kraken, which is closing its staking service for U.S. users as part of a settlement with the Securities and Exchange Commission, has been the largest unstaker thus far.
Lewis Harland, portfolio manager at Decentral Park Capital, said, "Over 77% of ETH being withdrawn has been from the exchange Kraken and the majority of withdrawn ETH by validators outside of this is rewards, not rewards plus original stake. This is a more constructive than the market had potentially anticipated."
Harland added, "With withdrawal restrictions in place and liquid staking derivatives like Lido not implementing withdrawals until May, we think the market is realizing they over indexed on the upgrade concerns allowing for ETH to finally test the $2,000 level once again."
Lido, a liquid staking solution, accounts for approximately 31% of all ether deposits. To date, 108,402 ETH have been unstaked, according to data source Nansen. Year-to-date, ether has increased by 65.25%, compared to bitcoin's 82.04% growth.
