Attention ETH holders! 

The much-awaited Shanghai upgrade is here, and guess what?

You will finally be able to withdraw your long-staked ETH! Yes, you read that right.

But what is this Shanghai upgrade, and will it impact ETH’s price?

Lace-up your boots and let’s explore this exciting change coming to the Ethereum network.

What Is Ethereum Shanghai Upgrade?

Shanghai upgrade is the next Ethereum upgrade right after the Merge.

If you recall, the Ethereum Merge, which happened in 2022, ultimately transitioned the Ethereum network from proof-of-work to proof-of-stake.

Shanghai is the next Ethereum upgrade, which will allow users to finally withdraw their long-staked ETH.

Too much information at once, right? Let’s rewind it to where it all started.

Ethereum was originally a proof-of-work blockchain and suffered scalability issues as a result.

In 2018, Vitalik Buterin and other Ethereum developers proposed ETH 2.0 to address this concern.

Ever since this proposal, Ethereum has gone through various stages of upgrades.

One of the major upgrades was the Beacon chain, which launched a separate proof-of-stake blockchain that runs parallel to the existing Ethereum blockchain.

This Beacon chain allowed ETH holders to stake ETH on the network or through Ethereum LSDs like Lido Finance in order to support the new blockchain and earn rewards.

However, there was a catch, they won’t be able to withdraw their ETH and rewards until a later upgrade. Woah!

At the time of writing (March 2023), over 16 million ETH are staked on the Beacon chain, according to CryptoQuant.

The “Merge,” another key phase of Ethereum’s upgrade to ETH 2.0, took place only last year, in September 2022.

With the Merge, Ethereum integrated the Beacon chain into its mainnet and fully became a proof-of-stake network. We published an article about it here.

Following the Merge is the Shanghai upgrade, which many ETH investors have been anticipating for a long time.

It is a hard fork that will let ETH holders unstake their ETH and claim staking rewards for the first time.

This upgrade was originally set for March, the third quarter of 2023, but has been moved to April 12, 2023.

There’s More!

The Shanghai upgrade is expected to bring a series of improvements to the Ethereum network. Take a peek:

• EIP-3651: Warm COINBASE
• EIP-3855: PUSH0 instruction
• EIP-3860: Limit and meter initcode
• EIP-4895: Beacon Chain push withdrawals as operations
• EIP-6049: Deprecate SELFDESTRUCT

The most notable improvement here is EIP-4895, which focuses on staked ETH withdrawals just like we have earlier discussed.

On the other hand, the goal of the other improvements listed is to reduce the Ethereum gas fee. Click here to learn more.

Note: EIP is short for Ethereum Improvement Proposal.

What would be the fate of $ETH after the Shanghai Upgrade? A sudden price crunch or a bullish sentiment? Read my thoughts on the matter below.

Post-Shanghai: Will $ETH Pump Or Dump?

When the Shanghai Upgrade goes live, 16 million staked ETHs, worth over $24 billion as of this writing, will be unlocked for withdrawals.

While this might sound interesting, it is also quite worrisome.

The reason is that there is a tendency for investors, especially the early birds, to be in a rush to sell off their long-staked ETH.

You see, when the Beacon chain launched, ETH was valued at around $600.

So, you might not blame these investors for willingly taking profits after waiting for almost three years. Yikes!

The bone of contention, however, is whether the selling pressure will cause ETH to plummet. LOL!

Well, the Ethereum developers have addressed this concern earlier. 👇

Ethereum withdrawal after the Shanghai Upgrade

After the Shanghai Upgrade, validators will have the option to either partially or fully withdraw their stakes.

Validators who opt for partial withdrawal will be incentivized to maintain 32 ETH stakes.

On the other hand, validators who opt for full withdrawal can only do so at a limited rate. For example, 43,200 ETH per day.

In addition, there would be incentives for compounding yields.

This withdrawal technique, I believe, will reduce the selling pressure of ETH and reduce the impact on the market.

Also, the compound interest would likely compel validators to re-stake their tokens and not sell them all at once.

Conclusion

Following the Shanghai Upgrade, the ETH community will finally reclaim their staked ETH without significantly reducing ETH’s price.

What do you think?

Put your thoughts in the comment box below, and I will respond. Thanks for reading!