The long-awaited Shapella upgrade on the Ethereum beacon chain is scheduled to occur at epoch 194048 on April 12. This would unlock over 16 million units or roughly $30 billion in staked ETH.
This Shanghai-Capella protocol update is designed to address Ethereum’s current limitations by decreasing transaction costs and enhancing scalability. With this update, Ethereum will have completely switched over to the proof-of-stake (PoS) consensus mechanism, enabling users to make full use of all its advantages.
This headline figure itself has caused some uncertainty and concern among users, investors, and traders about the potential effects Shapella has on ETH and similar token market demand and supply flows.
What can we expect with the Shapella upgrade?
While some in the market are concerned that the upcoming unlocking of ETH deposited in the network to enhance security in exchange for rewards will cause some holders to rush to exchanges to sell their tokens, others see this update as another groundbreaking event in the history of cryptocurrencies.
More than 18 million ether have been staked in the network since the Beacon Chain, the cornerstone of Ethereum’s proof-of-stake consensus, started operating in December 2020, enabling users to stake their ether to take part in block validation and earn rewards.
The most notable aspect of the impending Shanghai/Capella upgrade is the possibility for validators to withdraw either their accumulated rewards or their entire balance. As a result, Ether would migrate from the beacon chain to the execution layer, where it is freely tradable.
However, considering that staked ETH and rewards have been locked up on the Beacon Chain since its formation and that most people would be ready to take at least some profits from the coin, we should expect around half of the withdrawn ETH to be dumped, while the other half would circulate back onto the Beacon Chain through liquid staking providers.
Meanwhile, the tokens account for only 13% of the overall supply of ETH. This could lead to a short-term price drop in the market, but it is also possible that the demand for staking ETH could increase as more people become interested in participating in the network’s consensus mechanism.
Ether currently trades for $1,923 on CoinMarketCap at press time, an increase of 3.46% in the last 24 hours. The overall crypto market has also surged by 4.60%, with Bitcoin (BTC) hitting $30,399, a level not seen since June 2022.