Ethereum, the blockchain that supports the second-largest cryptocurrency, Ether (ETH), has completed a significant upgrade known as the Shanghai upgrade, or Shapella upgrade, on Wednesday. This upgrade allows Ether holders to withdraw their locked-up coins that were staked for rewards. The Shanghai upgrade is the most significant transition for Ethereum since its “Merge” upgrade last year, which changed the way the blockchain operates.
Shanghai Upgrade Solves the Merge Problem
A problem arose after the “Merge” upgrade, as holders who staked their Ether were unable to unlock their coins, creating liquidity concerns for some Ether holders. According to David Lawant, Head of Research at FalconX, as of Wednesday, the percentage of staked Ether in relation to the total supply of the coin was approximately 15.6%. This figure is notably lower compared to other competitors of Ethereum (ETH), such as Solana (SOL), Avalanche (AVAX), and Polkadot (DOT), where the percentage of native coins being staked ranges from 40% to over 70%. This observation highlights the comparatively lower rate of staking activity within the Ethereum network, indicating potential differences in investor behaviour and sentiment among different blockchain ecosystems.
The Shanghai upgrade would not only solve this problem but also potentially encourage more investors, particularly institutions, to participate in staking, Lawant said. However, staking is not without risks, as validators may face penalties and have some of their staked coins removed if they go offline or validate incorrect transactions. The process of unstaking Ether takes time, despite the Shanghai Upgrade being a success. Investors who wish to withdraw their original coins and rewards need to go through a queue, and the processing time depends on the number of withdrawal requests being processed simultaneously.
However, QCP Capital analysts hold a less optimistic view on the potential bullish scenario for the Shanghai upgrade. According to their analysis, Ether holders who are among the first in the withdrawal queue may choose to sell their coins, while those who are further back and unable to unstake their coins immediately might opt to hedge their positions through perpetual futures and other derivatives. This could potentially result in bearish price action, as different strategies are employed by Ether holders based on their position in the withdrawal queue.
Reliance on Lido For Liquid Staking Diminished
Lido DAO (LDO), a popular liquid staking solution for Layer 1 chains like Ethereum, has experienced a major decrease in activity in recent days. The platform gained widespread attention and adoption when Ethereum mainnet merged with the P-o-S Beacon chain, leading to a rise in the price of LDO, which reached highs of over $3 in a short period of time.
However, with the imminent withdrawal of locked ETH on the horizon, it seems that the reliance on the liquid staking platform has diminished considerably. Traders had previously staked their ETH, which was locked with ETH 2.0 smart contracts, into other protocols using the Lido platform, which allowed these tokens to be converted into a liquid form. But with the upcoming Shanghai upgrades, users will no longer be required to use Lido for liquidation of their assets.
Big Eyes Coin To Conclude Presale on June 3
Despite the market’s volatility, the Big Eyes Coin (BIG) project continues to garner attention and support, with investors eagerly anticipating the launch of its token on an exchange. The team behind Big Eyes Coin has confirmed that the presale will end on June 3rd. The digital asset has already made history, becoming the largest meme coin presale to date with over $33 million in funds raised, which has impressed many investors. This achievement highlights the growing interest in meme-inspired cryptocurrencies and underscores the potential for such projects to attract significant investment and support from the cryptocurrency community.
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