Ether jumped to an eight-month high today, outshining Bitcoin gains.
Ether (ETH), the second largest cryptocurrency by market cap, rose to an eight-month high on Tuesday. Data from TradingView shows the token hit $1,940 after hovering around a $1,850 resistance level for several weeks.
ETH has gained 6% over the past three days, while Bitcoin has remained relatively flat. The rally comes ahead of the long-awaited Shapella upgrade that’s set to go live on April 12.
The Shapella upgrade will enable validators to claim rewards for participating in network consensus and to reclaim their staked ETH. If successful, Shapella will be a huge step forward in the development of Ethereum as a newly-transitioned proof-of-stake blockchain network.
At present, there are 18 million ETH staked on the Beacon Chain, roughly 15% of the total supply.
There are some concerns that unlocking staked ETH will drive up selling pressure, but the Ethereum network have installed various safety measures to minimise market disruption and maintain an optimal number of validators. There is a daily limit of 2,200 withdrawals, with a maximum daily unlocks of 70,000 ETH.
Liquid staking will also likely tame selling pressure post-Shapella.
18 million ether has been staked on the Beacon Chain since 2020, but nearly 70% of these tokens have been staked through liquid staking protocols such as Lido and Rocket Pool. Liquid staking tokens can be staked without a lockup period, giving investors a good measure of liquidity.
If 70% of stakers already have reasonable liquidity through third party protocols, it’s unlikely that they’ll rush to exit staking when the Shapella upgrade goes live.
In addition, a research report by Bernstein pointed out that the reminaing 30% of validators are “original believers” who are unlikely to exit their positions in the current market.
Many investors, including the DeFi Investor, believe that the Shapella upgrade will have an overall positive impact on liquid staking platforms:
In the thread, he explains that liquid staking derivatives offer much more flexibility and liquidity to investors.
As a result, many are likely to opt for liquid staking even after the Shapella upgrade is complete, driving up the revenue of staking providers. This is particularly true of those who felt hesitant to stake their tokens while major upgrades were still pending.
The tweet explained: “Because liquid staking derivatives can be used across DeFi without giving up the staking yield. After withdrawing staked $ETH becomes available, the revenue of liquid staking providers will likely take off. Revenue goes up, and their tokens benefit as well.”
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