On April 13, at approximately 01:27 (Kyiv / Moscow time), the Shapella hard fork is activated on the Ethereum blockchain. The update will allow ETH to be withdrawn from staking, something that some validators have been waiting for since the launch of Beacon Chain in 2020.
The community is actively discussing the impact of the upgrade on the ecosystem of the second largest cryptocurrency by capitalization and, as a result, on quotes.
Some believe that the withdrawal of ETH from the deposit contract will put enough pressure on the price to fall. Others talk about growing investor interest in staking and a potential rally in the asset.
What is the Shapella update on the Ethereum network?
In September 2022, The Merge update was activated in Ethereum, with which the blockchain switched to the Proof-of-Stake consensus algorithm. Members of the main network were given access to staking – directly (validators) or through specialized protocols like Lido.
The Shapella hard fork includes changes to runlevels (Shanghai) and consensus (Capella) of the Ethereum blockchain. The most important of them is the ability to withdraw ETH from the Beacon Chain deposit contract.
The update is designed to reduce gas costs when performing transactions of certain types, optimize data storage, introduce a number of related EVM improvements and introduce new cryptographic primitives.
Shapella is activated on slot #6 209 536 – the first in era #194 048. At the time of writing, the network located in epoch #193 874. The hard fork will take place on April 13 at 01:27 (Kyiv/Moscow time).
How will the withdrawal of blocked assets take place?
Withdrawal of funds from a deposit contract is available only to addresses with the prefix 0x01, since only they can indicate the path for depositing cryptocurrency. Developers added corresponding data type in March 2021, so not all validators installed it – just over 43%, according to Metrica.
Cryptocurrency unlocking will not happen overnight. This dynamic process will take time and will depend on from a number of factors.
There are two extraction options available to users:
- partial (assets over the balance of 32 ETH) — the validator does not leave the Beacon Chain, taking part in the consensus mechanism;
- full – the validator leaves the network, ceasing to be a member of it. The entire balance (32 ETH and rewards) is unlocked.
In the first case, the withdrawal of assets will occur automatically “about once a week”. At the same time, within one slot (every 12 seconds), 16 partial withdrawals are available – 115,200 iterations per day (7200 slots).
In the second case, you need to take a place in the queue for unlocking.
The size of the latter depends on the total number of validators. The higher it is, the more users will be able to fully withdraw assets during one epoch. According to the developers, this approach will mitigate security risks and limit the impact of the process on Ethereum quotes.
How much Ethereum can be withdrawn from staking after Shapella activation?
According to the service beaconcha.in, at the time of writing, there are 562,801 validators on the blockchain. There are over 18 million ETH on the deposit contract, and the average validator balance is estimated at 34.01 ETH.
According to documentation project, with the above inputs, full unlocking of funds is available for eight validators per era (1800 per day). This means that 57,600 ETH (~$110.47 million at the exchange rate at the time of writing) can be withdrawn from staking each day under this procedure.
For comparison: according to CoinGeckoas of April 11, the daily trading volume in the ETH/USDT spot pair on Binance alone exceeds $975 million.
An address with a prefix of 0x01 has about 242,005 validators. Even if these network members queue up (highly unlikely), it will take 135 days to release all their assets.
How will Shapella affect the price of Ethereum?
At Galaxy Digital expectthat validators can sell over 500,000 ETH:
“Assuming conservatively that validators realize 50% of their reward [за стейкинг], we expect 553,650 ETH to be traded. On a seven-day basis, this amount is approximately 1% of the daily ETH trading volume (including spot and perpetual futures).”
According to analysts, this amount may put “insignificant or slightly bearish” pressure on quotes. They also emphasized that, in case of successful activation, the hard fork could become a price increase driver.
In conversation with The Block The head of Cronos Labs, Ken Timsit, said that in the short term, Shapella could cause volatility in the Ethereum market. However, according to him, later the situation will “smooth out”, since the event is “already included” in the quotes.
Sam Andrew, head of investment at FRNT Financial, also believes that the update will not cause a “substantial” price movement. Among the reasons, he named the restrictions on withdrawals of funds set by the developers and the desire of validators to receive more rewards for staking, keeping the cryptocurrency on the balance sheet.
2/ Background: Shapella allows stakers to unstake their eth.
It’s a big deal.
Prior to 4/12/23 when Shappella goes live, stakers have not been able to unstake their eth.
Stakers have been staking for up to 2.5 years and can finally get their staked eth + rewards back.
— Sam Andrew (@samuelmandrew) April 11, 2023
Troubled companies like Celsius can start seizing and selling assets. Concerns also remain regarding similar actions from the Kraken exchange. The latter is under the gun of US regulators because of its staking program.
However, regardless of the short-term movement of quotes, we can expect an influx of liquidity into the Ethereum DeFi ecosystem and an increase in investor interest in cryptocurrency staking. Therefore, in the long term, the activation of Shapella will potentially have a positive effect on the price of the asset.
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