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Post-Shapella Environment, Staked Ether Withdrawals Update and ETH Price Action

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On Wednesday, the Ethereum Foundation celebrated completing the Shapella upgrade in a largely flawless manner. Though some blocks were missed early on due to a huge number of BLS changes, stability was quickly regained thereafter.

Ethereum Post-Shapella: How it went down

While there were divergent expectations for Ether’s price performance post-Shapella, the ecosystem was initially tranquil. Ethereum first traded evenly after the April 12 upgrade before accelerating on Thursday crossing the crucial $2,000 level. Afterward, the premier altcoin edged upwards, breaching $2,100 by Friday's early morning Asian hours.

Ether price course in context of Shapella. Source: TradingView

Post-Shapella market action suggests that investors derived confidence from the upgrade reflected in more staking activity, which might result in a moderated supply in circulation. Given sufficient liquidity directly on-chain, analysts have opined that the demand for Ether will only continue increasing with every successful network upgrade.

Staked Ether withdrawals update

Blockchain analytics data provider Nansen shows that Kraken exchange leads among the entities with the most withdrawals in line, making up for about 62.8% of the exit queue – 556,290 Ether.

Staked Ether withdrawal. Source: Nansen

Behind Kraken in the number of withdrawals in line is Coinbase, with 100,706 ETH, making up 11.4% of the exit queue. Third place HTX accounts for 5%, roughly the same as the combined proportion of the rest of the major exchange.

Kraken leads the exit queue

Kraken heralding the withdrawals is not of much concern given that the exchange has recently been the subject of regulatory action by the US SEC over its staking products, parting with a $30 million fine and having to stop offering them in the US. Nevertheless, users outside the jurisdiction can choose to continue staking with Kraken.

Are regulators leading the decentralization charge on Ethereum?

Given users deposits unlock on Ethereum, a persistent concern arising thus far has been that control of the network significantly remains in the hands of huge centralized entities. Lido enjoys the saving grace that is Lido DAO, which helps it serve blockchain's purpose of decentralizing finance.

Ether staked through LSDs

It is probable that the troubles these crypto exchanges have faced with regulators, particularly in the US, have caused jitters among users who would rather seek alternative decentralized platforms where to stake their Ether. Coinbase was served a Wells Notice for the US securities watchdog, suggesting potential legal action for several breaches, including the Coinbase Earn staking product. Binance is also facing questions from the CTFC over various derivatives regulations violations that experts contend could significantly disrupt its operations.

From some perspective, it would seem that regulators are just leading a decentralization push for the Ethereum protocol, though in a rather unorthodox manner.

Binance users are to get their staked Ether starting next week

Binance, the largest exchange by trading volume, confirmed that users would be able to start liquidating their staked Ether positions starting next week, on April 19 at 8.00 UTC. According to an official Twitter thread published by the exchange on Thursday, users would need to redeem their BETH (the wrapped Ether token issued by Binance) for the crypto to land in their spot wallets. In some cases, the customers would have to wait for up to 15 days before the entire process is done.

Further, they could confirm the anticipated distribution date before finalizing the requests to exit but cannot cancel requests once submitted. The announcement added that every entity would have a specified daily limit for the amounts they can redeem. Coinbase had not given any news updates, sticking with the information it had previously shared that customers ought to remain patient as the Ethereum unstaking process could take a while – in the order of weeks to months.

Pending ETH withdrawals are nearing 1.15 million

The total pending withdrawal has increased as Ethereum users continue lining up to get their crypto and stood at 1.14 million. Token Unlocks data also shows that as much as 23.55K Ether is set to be available to users in the next 11 hours. Etherscan's processed Beacon chain withdrawal dashboard shows that a total of 303,251 Ether tokens had been withdrawn in 182,877 requests at the writing. Since Shapella, more Ether has been withdrawn than deposited, placing the net staking balance at -137.8K.

Staked Ether withdrawal dashboard. Source: Token Unlocks

As of the time of writing, the total effective balance of active validators securing the Ethereum network is 17.4 million Ether (19.1 million accounting for rewards), representing 14.5% of the total supply. Nansen indicates that the measure of staked Ether has dropped 0.1% in the last 24 hours.

Ethereum (ETH) price cools down after ripping $2,000

The hype around Wednesday's event sparked excitement in the market on Thursday as Ethereum's Ether rose sharply. Ether (ETH) price raced past the psychological $2,000 barrier a few hours after the successful event before advancing to a local high of $2,130. The latest ascent brings Ether price 71% up year to date and 11% in the last seven days. Though the ETH/USD pair has lulled below the new height in the last few hours, its double-digit gains in the last seven days are only bettered by a handful of altcoins.

Meanwhile, OI market data on various exchanges indicates that Open Interest for futures contracts has bulged and is currently hovering around a year high. ETH open interest peaked at $7.6 billion earlier today, as per Coinglass data.

ETH Futures Open Interest. Source: Coinglass

Liquid staking tokens also reacted well to the steady withdrawals that defied the probable selling pressure that would have been if there were an avalanche of exit transactions. Notably, the upward course has helped the tokens recover from the losses they had recorded leading up to Shapella. Liquid staking protocol native tokens, including Rocket Pool, Lido DAO, and Frax Shares, have benefitted from the event, registering modest rallies towards the end of the week.

Liquid staking tokens performance

These staking platforms provide Ethereum holders with a convenient way of staking their tokens in exchange for the respective governance tokens that can be used to bring additional yield. In contrast to market expectations of staked ETH withdrawals leading to selling pressure, the price has moved upwards.

Ethereum now aims for a 10X faster transaction experience for layer two

With the fire of Shapella still alive, Ethereum proponent Anthony Sassano reminded the community to sit in wait for the next significant technical upgrade planned for the Ethereum network. EIP 4844 (proto-danksharding), expected to ship as part of the Cancun/‘Dencun’ upgrade, will bolster the scalability of rollups (layer twos) built atop Ethereum.

Coinbase protocols lead Jesse Polak deemed the progression towards this next EIP as a pathway towards pushing more and more people onchain, as the upgrade would make the environment much more friendly, reducing the gas fees by a scale of 10 to 100, via novel blob-carrying transactions on Ethereum. Co-founder Vitalik Buterin has also highlighted the importance of solving the scalability issues of the protocol, particularly before the next bull run. Buterin explained during Ethereum Foundation's live stream following Shapella that it would be unideal to have users stuck paying $500 transaction fees once this period of booming activity inevitably returns.

To learn more about Ethereum, check out our Investing in Ethereum guide.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.