Multidimensional Analysis of the Selling Pressure Issue in Ethereum Shanghai Upgrade

Ethereum plans to undergo the Shanghai upgrade in March this year, which includes the unlocking of staked ETH 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 supply, with 495,000 active validators and an annualized interest rate of 4.2%.

There are concerns that the unlocking of open staking may lead to significant selling pressure, especially considering the lower costs of early stakers. However, a comprehensive analysis suggests that these concerns may be exaggerated. The following explores this issue from nine perspectives:

1. Gradual Release Mechanism

Unlocking adopts a progressive model, with a theoretical daily withdrawal limit of approximately 55,000 Ether. The system can activate 7.55 validators per epoch, with 225 epochs each day. The withdrawal rate will be adjusted based on the total staked amount to prevent sudden large-scale outflows.

2. Characteristics of Early Stakers

Users participating in early staking are mostly long-term supporters of Ethereum with a higher risk appetite. This group has a relatively low willingness to sell in the current market situation.

3. Partial withdrawal demand has been released

Many staking participants go through third-party services, some of which have completed their exit. For example, Lido users can exchange stETH for ETH through Curve without waiting for the Shanghai upgrade. Last year, there was a discount on stETH, and some of the exit demand has been met.

4. Increased Attraction to Institutions

Unlocking openness may instead attract more institutional participation:

• Enhance user confidence
• Provide a better exit mechanism
• Meet the needs for stable returns in a bear market

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

5. Staking Cost Considerations

The early staking cost of ETH was about $500, but most staking costs may be above $1500, higher than the current market price.

6. Changes in the Nature of ETH Assets

After the PoS transformation, the nature of ETH has fundamentally changed:

• Move towards deflation, reduce potential selling pressure
• Earn rewards through staking
• Become an ecological underlying asset, with more use cases.
• The new rate is significantly lower than other crypto assets.

7. Community Consensus Foundation

Ethereum has a strong developer, ecosystem, and user base, forming a solid community consensus. With the development of the ecosystem and L2 expansion, its role as a settlement layer and security provider will become more prominent.

8. Dynamic Balance of Staking Yield

The amount of ETH staked is inversely proportional to the yield, forming a dynamic balance. The current annualized yield of about 4.2% remains attractive even 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, such as reducing gas fees and supporting more complex contracts, which are beneficial for the long-term development of the ecosystem.

Conclusion

In summary, the upgrade of the withdrawal function in Shanghai has a limited impact on the selling pressure of ETH and is beneficial for the long-term development of the Ethereum ecosystem. However, the price fluctuations of ETH are influenced by multiple factors and should not be simply equated with the upgrade itself. Investors must maintain independent judgment and manage risks properly.