Ethereum Shanghai Hardfork to Stir Major Price Volatility


Amid the broader crypto market correction, the world’s second-largest digital asset Ethereum (ETH) is already down 7.5% trading below $1,200. The recent price drop has eroded all last week’s gains for ETH.

Now, the cryptocurrency faces the risk of a further decline in the future. Ever since the Beacon Chain upgraded last year, ETH investors have been staking their coins with Ethereum 2.0. Now, the recently upgraded Ethereum 2.0 blockchain holds 12% of the total supply.

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On the other hand, ETH exchange reserves have dropped to 15% of the total supply and continue to decline further. However, ETH faces a potential threat to its price as the Shanghai hard fork approaches, scheduled for March 2023.

This fork will make it possible for investors to withdraw the Ether staked with the validators of the network. On-chain data provider CryptoQuant explains a scenario that could lead to a sell-off in the price of Ether.

What happens to ETH with withdrawals in Ethereum 2.0?

One of the most looming questions ETH investors have is how much ETH can be withdrawn on Ethereum 2.0. Almost 12% of the total supply or 15 million ETH coins currently reside on Ethereum 2.0. CryptoQuant data provider Explain:

“From a short-term perspective, there are higher APY strategies than staking rewards by depositing ETH2 that you might not promise to withdraw.”

Also, let’s take a look at the change in Ethereum 2.0 balances. Compared to last year 2021, the total number of depositors with ETH2 has increased by 57% this year. However, the total deposit balance has remained the same. This shows that the total balance per deposit eventually increased by 133% in 2022.

Ethereum 2.0 Staking
Courtesy: CryptoQuant

Commenting on ETH exchange reserves, CryptoQuant explains: “It may be that the balance of $ETH2 increases as $ETH The exchange reserve decreases. 18M of $ETH 15% of the total offer are carried out on the stock market. However, the exchange reserve follows a downward trend.

As supply dynamics change after the Shanghai hard fork, ETH price volatility will be imminent.

Bhushan is a FinTech enthusiast and has a good knack for understanding financial markets. His interest in economics and finance draws his attention to the new emerging markets of Blockchain technology and cryptocurrencies. He is continuously in a learning process and stays motivated by sharing the knowledge he has acquired. In his spare time, he reads thrillers and sometimes explores his culinary skills.

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The content presented may include the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrency. The author or publication has no responsibility for your personal financial loss.