Analysis of the Impact of Ethereum Shanghai Upgrade on ETH Sell Pressure

Ethereum plans to undergo the Shanghai upgrade this March, which includes the unlocking of staked ETH on the Beacon Chain (EIP-4895). Currently, 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 concerns that a large sell-off may occur after the staking unlocks, especially considering the lower costs for early stakers. However, from multiple perspectives, this concern may be exaggerated.

1. Gradual Release Mechanism

The unlocking adopts a gradual approach, with a daily withdrawal limit of approximately 55,000 ETH. The system can activate 7.55 validators per epoch, with 225 epochs per day. The withdrawal rate will be adjusted based on the total amount of staked assets to prevent sudden large-scale outflows.

2. Investment Philosophy of Early Participants

Users who participated in staking early are mostly long-term supporters of Ethereum and have a high risk tolerance. This group has a lower willingness to sell in the current market environment.

3. Some withdrawal requests have been met

Users who have staked through certain protocols or centralized exchanges already have ways to exit. For example, users of a certain protocol can exchange their staked tokens for ETH through a certain DEX, without waiting for the Shanghai upgrade. Last year, staked tokens had a noticeable discount, and some institutions and users have already completed their exit.

4. Attractiveness to Institutional Investors

The unlocking of staking may actually attract more institutions or large holders to participate:

• Enhance user confidence
• Provide a better exit mechanism
• Provide stable returns in a bear market (4.2% annualized)

After the expected opening of staking, there may be a slight decline in the short term, but the overall trend is upward, and it may exceed 20% of the total ETH supply within a year.

5. Staking Cost Considerations

Although the initial staking cost of ETH was around 500 USD, most staking is likely to occur above 1500 USD, which is higher than the current market price.

6. Changes in the Essential Properties of ETH

After the PoS transformation, the nature of ETH has undergone significant changes:

• Move towards deflation, reduce potential sell pressure
• Earn returns through staking and become an underlying asset of the ecosystem.
• The new issuance rate is significantly lower than that of other crypto assets.

7. The Role of Community Consensus

Ethereum has a strong developer, ecosystem, and user base, forming a solid community consensus. With the development of the ecosystem and L2 expansion, its position as a foundational settlement layer and security provider will be further consolidated.

8. Dynamic Balance of Staking Yield

The amount of ETH staked is inversely proportional to the yield, forming a self-balancing mechanism. Higher yields attract more participants, while lower staking amounts increase yields, maintaining dynamic equilibrium.

9. The Comprehensive Impact of the Shanghai Upgrade

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

Conclusion

In summary, the upgrade to open withdrawal functions in Shanghai may have limited impact on the selling pressure of ETH. This upgrade is beneficial for the long-term development of the Ethereum ecosystem and can be viewed as a positive event. However, the price fluctuations of ETH are still influenced by multiple factors, and investors should maintain independent judgment and manage risks appropriately.