Analyzing Ethereum’s Price After the Shanghai Upgrade: The Impact of Unlocked ETH on Selling Pressure | by LBank Exchange | Apr, 2023

From the LBank blog.


The Ethereum community has been anticipating the Shanghai and Capella hard forks, scheduled for April 12, 2023, which will allow the extraction of ETH funds under the new Proof of Stake (PoS) consensus mechanism.

This article analyzes the potential selling pressure from unlocked ETH from the perspective of stakers and discusses the estimated number of already staked ETH that may be withdrawn and sold immediately after the upgrade.

After studying different staking groups and their motivations for selling unlocked ETH, we estimate a total of 170,000 ETH will be sold following the Shanghai upgrade.

Ethereum’s Staking Landscape:

To better understand the staking landscape, we will provide a brief overview of Ethereum’s PoS consensus mechanism participants, including depositors, validators, and nodes.

Depositors are individuals or entities activating a validator by sending 32 ETH to an Ethereum smart contract.

Validators are virtual entities on the Beacon Chain, while nodes are physical hardware running validator software.

Anticipated Selling Pressure:

We expect only 100,000 ETH ($1.9 billion) of the total accumulated rewards to be withdrawn and sold. In addition, we anticipate twice the number of validators exiting, but with only a limited number of stakes being released daily.

We believe only a small portion, around 70,000 ETH ($1.33 billion), will become truly liquid funds.

The economic impact of this situation will be sustained for several days to weeks. Based on our analysis, the impact on Ethereum’s economy is expected to be much smaller than many have predicted.

It can be argued that the technical delivery of the upgrade is more likely to support a growing staking industry, which seeks to better serve Ethereum holders in the long term.

Unlocking Process and Validator Withdrawal:

With the Shanghai upgrade, rewards accumulated over two years will be unlocked at once. Currently, there is an excess balance of about 1,137,000 ETH, worth approximately $21 billion, for those who have not actively participated in PoS.

After the Shanghai upgrade, this amount will be automatically withdrawn from the Beacon Chain and transferred as an automatic balance update to the Ethereum mainnet address of depositors.

Only validators with 0x01 withdrawal credentials will participate in the automatic withdrawal process. Approximately 44% of validators currently possess the correct withdrawal credentials.

However, many validators still need to update their credentials, with many having been deployed during the early days of the Beacon Chain, thus accumulating substantial staking rewards.

Predicting Partial and Full Withdrawals:

To estimate the amount of accumulated rewards that will be sold, we analyze based on the depositor segmentation mentioned earlier.

Since Lido holds a significant share of the accumulated rewards and has committed to mainly restaking the rewards, we believe other staking providers will follow suit, resulting in a large portion of staking rewards being locked up again.

Considering the limited daily validator exits and the different waiting periods, we have simulated the cumulative amount of accessible ETH after the Shanghai upgrade. After seeing three significant increases in the number of validators signing voluntary exit agreements, we currently observe a total of 45,098 ETH ($83.3 million) available for stakers to use.

It is worth noting that few staking providers have withdrawn their validators so far. Among the largest staking providers, only Coinbase has announced that it will allow immediate withdrawals after the Shanghai upgrade. Lido is said to enable withdrawals in May, while Kraken and Binance have not announced dates.


Our analysis suggests that the potential selling pressure of ETH following the Shanghai upgrade is likely to be much smaller than many people anticipated. The upgrade’s technical delivery will likely support the growth of the staking industry, which seeks to better serve Ethereum holders in the long term. Despite the unlocking of substantial staking rewards, we anticipate a limited impact on Ethereum’s price due to several factors. These factors include the commitment of significant staking providers to restake their rewards, limited daily validator exits, and the different waiting periods for withdrawals.

Furthermore, the Shanghai upgrade is expected to strengthen Ethereum’s network and encourage more users and investors to participate in the staking ecosystem. The long-term growth of the staking industry will ultimately contribute to Ethereum’s price stability and increase its appeal to a broader audience.

Overall, while the Shanghai upgrade may initially cause some fluctuations in the market, the long-term prospects for Ethereum remain positive. As the staking industry continues to evolve and mature, Ethereum holders can expect to benefit from improved staking services and more significant rewards, ultimately supporting the growth and value of the Ethereum ecosystem.

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