Shanghai's release is a welcome development, as the ability to withdraw funds from the smart contract has been unavailable since its launch in December 2020. In early 2023, it was revealed that the developers of Ether had decided to reduce the number of innovations in Shanghai for the sake of an early upgrade release.

The planned deadline in this case is the end of March, which is soon enough. As such, it is important to assess the prospects for the impact of this upgrade on the digital asset industry as a whole. Let’s analyse the implications of ETH rising or falling ahead of the upgrade.

What will happen to Etherium?

According to Cointelegraph’s sources, there are currently around 16.6 million ETHs worth more than $28 billion worth of assets currently held in the deposit smart contract of Etherium at the cryptocurrency’s current exchange rate.

Actually, it is this amount of assets that is the key to blockchain security, as validators pledge their own cryptocurrency as a sign of good faith of their intentions. If they harm the operation of the network, they will receive fines.

Growth in the volume of funds on deposit in the Etherium smart contract

ETH itself continues to cement its reputation as a deflationary asset – 158 days after switching to Proof-of-Stake, more than 29,200 ETH has already been burned. In other words, over the past year, the supply of ETH has fallen by 0.05 per cent. That figure now stands at 120 million ETH.

Ether burn rate and current ETH cryptocurrency supply

As a reminder, ethers in this blockchain are burned as commissions that users pay to conduct transactions. The more visibly the blockchain becomes burdened and its resources consumed, the higher the level of commissions becomes and the stronger the cryptocurrency supply decreases.

The conclusion from this is that after the release of Shanghai, about 14 per cent of the entire cryptocurrency supply will be in the deposit smart contract. Given what is happening, ecosystem participants fear that many stackers will allegedly start withdrawing their coins and selling them, thus leading to a subsequent drop in the price of Etherium. Will it actually happen? Let’s look at a few key factors in this vein.

The first of these is liquid-stacking platforms. To become a full-fledged validator on the Etherium network, 32 ETH would need to be locked into a deposit smart contract. Generally, these coins will lie “dead weight”, meaning no profit can be made from them except by selling them after withdrawal and only if the price of ETH rises. At the same time, however, liquid-stacking platforms accept assets into stacking from users and in return give them liquid tokens that can be used for transactions, deposits, and other ways to make a profit.

The most popular of these coins is STETH or Lido Staked Ether. It is issued in exchange for ethers staked through the Lido platform, which is the best known of its kind.

The share of liquid and illiquid stacking

That is, a customer of such a platform receives both passive income from the Ethereum staking and earns from the tokens issued to them. The tokens received must then be used on the platform to generate the original amount in ethers.

Liquidity-stacking derivatives in the form of tokens have become popular since the transition of Ethereum to PoS. Specifically, as of today, 57 per cent of ETH in stacking is deposited through liquid stacking platforms like Lido, Rocket Pool and Ankr. The bottom line is that if investors already have most of their ETH in the form of liquid tokens, it makes no sense for them to sell Etherium once it is unlocked.

If they wanted to, they would have already done so, as the value of the aforementioned STETH coincides with the price of regular Ether.

Ether exchange rate over the last 90 days

The second factor is the profitability of future ETH sales for the validator. Since the launch of the deposit smart contract, the price of Etherium has fluctuated between $400 and $700. Nevertheless, many investors started investing the coins in the stack when the price of ETH was close to its all-time high of $4,200. Analysts at the Binance exchange had previously published a study on this. Here is their quote.

We note a significant number of ETH (about 2 million) deposited into the stacking at a price in the range of $400 to $700. These are the earliest validators of December 2020, a group of investors who must have invested coins mostly in illiquid stacking, as there simply wasn’t much choice of other options at the time.

ETH’s profitability in stacking

Since hitting its all-time high, Etherium has fallen in price by almost 69 per cent. After Shanghai, most ETH holders are unlikely to immediately sell the coins, because it is trivially unprofitable for them at current exchange rates.

The third factor is the growing popularity of the Lido platform. On January 2, 2023, Lido officially surpassed the MakerDAO platform in terms of total value of blocked assets. It is also the most popular option for ETH stacking: more than 5 million coins have already been invested in stacking through it, and the protocol’s share reaches 29.2 percent in all areas of stacking, including illiquid stacking.

The biggest players in the steaking industry

Again, the platform’s customers and the platform itself will not organise a targeted sale of ETH once coins are unlocked, because there is more harm than good in doing so. On the contrary, the release of Shanghai may attract new investors to the altcoin ecosystem, as they will now have the certainty of being able to get their money back from steaking.


Separately, please note that due to the way the protocol works, it is not possible to withdraw all ethers from stacking on the same day. As the developers note, the maximum amount to withdraw per day is 43,200 ETH. Accordingly, to withdraw a million ethers from the stacking, it would take a little over 23 days, and currently there are over 16 million ETH in the stacking. So even with all the cryptocurrency permanently withdrawn from the stacking, it would take about 384 days, which is more than a year. So worrying about a massive drain of unlocked coins is clearly not worth it.


Etherium creator Vitalik Buterin


We believe that speculations about alleged preparations to merge Ethers solely because of the possibility of taking the cryptocurrency out of steaming are unwarranted. Still, the coins were being steamed by ETH fans, who were aware of the impossibility of withdrawal, so it is unlikely that they sent the last of their money. In addition, the protocol supports only gradual withdrawal of cryptocurrencies, which means that it is clearly not worth counting on serious pressure from sellers.


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