Analysis of Selling Pressure Issues After the Ethereum Shanghai Upgrade

Ethereum plans to undergo the Shanghai upgrade in March this year, which includes unlocking ETH staking on the Beacon Chain (EIP-4895). As of now, the total amount of staked ETH is approximately 15.85 million, accounting for 13% of the total, with 495,000 active validators and an annualized interest rate of 4.2%.

There are opinions that the unlocking of open staking may lead to significant selling pressure, especially considering the low costs for early participants. However, a comprehensive analysis indicates that this concern may be exaggerated. Here are several key factors:

1. Gradual Release Mechanism

The unlocking adopts a gradual release model, with a daily withdrawal limit of approximately 55,000 Ether. This mechanism can prevent a sudden large outflow and slow down market impact.

2. Characteristics of Early Participants

Early stakers are mostly long-term supporters with a high-risk appetite, and their willingness to sell is relatively low in the current market conditions.

3. Partial withdrawal has been completed

Users who have staked through protocols like Lido now have the opportunity to exit through other means, such as swapping stETH for ETH on Curve.

4. Attractiveness to Institutional Investors

The unlocking feature may instead attract more institutions or large investors to participate, as it provides a better exit mechanism and stable returns.

5. Staking Cost Considerations

The cost of most staked ETH is estimated to be above $1500, higher than the current market price, reducing the motivation to sell.

6. Changes in the Nature of ETH Assets

After the PoS conversion, ETH gradually moves towards deflation and offers staking rewards, making it a foundational asset in the ecosystem. Compared to other cryptocurrencies, the issuance rate of ETH and the daily increase in value have significantly decreased.

7. The Importance of Community Consensus

Ethereum has a strong developer, ecosystem, and user base, forming a solid community consensus, which will be further enhanced as the ecosystem develops.

8. The dynamic balance of staking yield rate

There is a dynamic balance between the amount staked and the yield, with higher yields potentially attracting more participants, especially in a bear market.

9. The comprehensive impact of the Shanghai upgrade

In addition to the staking unlock, the Shanghai upgrade also includes other improvements beneficial to ecological development, such as reducing gas fees and supporting more complex smart contracts.

In summary, the upgrade of the withdrawal function in Shanghai may have limited selling pressure on ETH and could instead become a long-term positive factor. However, the price of ETH is still influenced by various factors, and investors should remain vigilant and manage risks.