A representation of the Ethereum cryptocurrency is seen in this illustration taken August 6, 2021. (Reuters)
Cryptocurrencies
Investors are expected to finally have access to more than $33 billion worth of Ether this week as part of a planned blockchain overhaul.
A new software upgrade to the Ethereum blockchain, dubbed Shapella, will allow market participants to redeem their “staked ether” – the coins they have deposited and locked onto the network over the past three years in exchange for interest. .
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About 15% of all ether is staked, totaling $33.73 billion in market value, according to data from Dune Analytics.
Up to 1.1 million ether will be ready for withdrawal within a week of the blockchain overhaul, estimated Sreejith Das, CEO of Attestant, a company that facilitates ether staking. That would be nearly $2 billion, based on the latest Ether price of around $1,860.
Traders looking for an edge are now trying to figure out how this sudden Ether bonanza might affect prices. It is hard to judge, however, said Robert Quartly-Janeiro, chief strategy officer of crypto exchange Bitrue.
“The only certain thing is that the Shanghai hard fork will cause some short-term volatility,” he added.
There are fears in some corners of the market that unlocking staked coins will lead to massive withdrawals and a wave of sell-offs, which could bring prices down quickly.
Yet, according to Bundeep Rangar, CEO of blockchain investment firm Fineqia International, only around 29% of all ether staked by volume is currently in dollar profit, which would mean most would be sold at a loss.
“So it seems unlikely that much of the staked ether will be sold,” Rangar added.
"Last Piece of the Puzzle"
Shapella would mark the end of a long wait for investors who had opted to deposit ether in exchange for yield since the staking project began in 2020.
Ethereum developers paved the way for this development with a major update called “Merge” last year, which ditched energy-intensive mining and moved to a “proof-of-stake” system. where Ether owners lock 32 coins to verify new records on the blockchain, earning new Ether in addition to their “staked” coins.
Until the planned overhaul this week, investors looking to stake coins had to deposit a minimum of 32 ether at a time (worth $59,520 at current prices) for an indefinite period of time, a sizable sum out of reach. of an average retail investor.
"Before Shanghai, a lot of people and institutions probably chose not to stake their ether because once they did, it would have been locked away for an indefinite period of time, which was risky," he said. said Dave Weisberger, CEO of Digital Assets Trading. CoinRoutes platform.
After the upgrade, staked ether will no longer be locked to the blockchain, so investors might be more willing to stake coins.
The market value of tokens behind projects like Lido Finance and Rocket Pool, some of the biggest projects providing liquidity for crypto staking, soared nearly six times to $2 billion and four times to $875 million respectively this year, according to CoinMarketCap, on expectations of further growth.
“It is likely that in the long term, the amount of ether staked will increase, especially compared to the percentage of supply staked for other digital assets such as Solana, Mathic and Ada,” said Rangar of Fineqia.
So what type of investors are likely to enter the market following the changes Shapella brings?
“It will be those institutions that have sat on the sidelines, silently waiting for that final piece of the puzzle to be put in place, the ones that needed to be able to withdraw their ether before they were allowed to stake it,” Das said. at Attestant.
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