With the Ethereum Shanghai upgrade coming in April, ETH holders will finally be able to cash out their holdings. But will people buy them?
The Ethereum upgrade to Shanghai is coming up soon, so users are starting to place their bets.
This specific enhancement is focused entirely on one feature: the withdrawal of staked Ethereum. Since December 2020, when staking began and the network began its move to a proof-of-stake consensus algorithm, those who locked up their funds have been unable to withdraw them.
This will likely alter in April. However, is it bullish or bearish?
Some have argued that people will swiftly withdraw their ETH and sell it to realize profits.
Those advantages will not be significant. If you had locked your ETH holdings on December 1, 2020, the price was $612. Selling at current prices means you’d still nab a whopping 156% win.
Those are undoubtedly respectable advances, but only for a minority of users.
According to Dune, since the beginning of staking, only 16% of stakers are in the money in dollar terms. If the upgrade were implemented today, the overwhelming majority of users would suffer significant losses.
It is impossible to predict what individuals will do when faced with the possibility of double-digit losses. Still, there are approximately $6.25 billion in winning wagers; it is probable that some of them will sell.
Is that the bear’s position?
After nearly three years, during which the developers ultimately delivered the much-anticipated merge event, people will double down. Once people realize that, sure, if they put their money into this black box, they can earn a yield and withdraw their money whenever they want, the risk profile of staking decreases dramatically.
The most recent enhancement to Aave does precisely this. Here is how it operates: Deposit your Ether into the liquid staking protocol Lido Finance to receive staked Ether (stETH); use the stETH to borrow more Ether on Aave; restake the Ether on Lido; and repeat the cycle based on your level of degeneracy.
Spark Lend, a not-yet-launched product created by a few MakerDAO engineers, will also provide a comparable utility.
This is evidently extremely risky, and you should consider yourself liquidated if Ethereum experiences any volatility.
