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(Kitco News) - The latest upgrade to the Ethereum network, the Shanghai hard fork, has raised concerns for some in the crypto community who worry that enabling the ability to withdraw Ether staked on the Beacon Chain will result in a massive sell-off in the price of ETH.
With less than 24 hours to go until Shanghai is integrated, on-chain research firm Glassnode is looking to calm those fears in its latest report by noting that, “After examining the different staking cohorts and their motivations for selling their unstaked ETH, we estimate a total of 170k ETH intended to be sold after the Shanghai upgrade.”
Glassnode also anticipates that roughly 100,000 Ether out of the total accumulated rewards will be withdrawn and sold. “Furthermore, we expect to see twice as many validators exiting, but only a limited amount of stake will be released per day. We believe only a fraction of that amount, around 70k ETH ($133M), will actually become liquid.”
While these figures are projections, the firm also noted that even if the maximum amount of rewards and staked Ether were withdrawn and sold, the sell-side volume would fall within range of the average weekly exchange inflow volume.
“Therefore, we conclude that even the most extreme case will have an acceptable impact on the price of ETH,” the authors wrote.
Glassnode arrived at its estimates by focusing on depositors, “as depositors can own multiple validators, and ultimately, it is at the depositor (human) level where decisions about withdrawing funds, and usage of the funds will be made.”
According to the data, the firm indicated that only 253 depositors are waiting to exit their stake and highlighted that there are several mechanisms in place to prevent a flood of Ether supply from hitting the market all at once.
“Looking at full withdrawals, it is important to note that only a limited number of validators can exit per day,” the report said. “With the current churn limit of 8 per epoch, and with 225 epochs per day, a limit maximum of 1800 validators can be withdrawn per day, equating to 57.6k ETH.”
Validators will also be required to pass through a withdraw-ability delay lasting a period of 256 epochs, or roughly 27 hours.
In total, Glassnode determined that there is an accumulated total of 45,098 Ether, worth approximately $83.3 million, that will be made available to stakers and available for withdrawal.
“The stake withdrawal process will take two days for the total amount to have exited the Beacon Chain, which means we will see at least 45,098 ETH ($83.3M) exiting the Beacon Chain between 12-Apr and the 14-Apr,” Glassnode wrote.
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The maximum number of ETH that could be unstaked in the 24 hours after Shanghai is implemented is 57,600 Ether ($109.4M). An equal amount could be unstaked each day following its implementation until the churn limit readjusts.
In conclusion, Glassnode indicated that “the main bulk of unlocked staking rewards are expected to be from users redeploying towards liquid staking providers, which already have little need to sell due to being underwater.” There are currently only 253 depositors waiting to exit their stake, which “is a remarkably small number.”
“Based on our analysis, the impact on the Ethereum economy is expected to be a lot less dramatic than many have painted it to be,” Glassnode said. “It is arguably more likely that the technical delivery of the upgrade will bolster a growing staking industry, which seeks to better serve holders of Ether over the long-term.”
