Shanghai upgrade will not unleash a flood of staked ETH sales, Glassnode predicts

Glassnode predicts that only a small fraction of the ETH locked on the Beacon chain will be released and sold after the upgrade scheduled for April 12.

Only a small fraction of the 18.1 million ETH locked on the Beacon chain will be released in the first week after the highly anticipated Shanghai/Capella hard fork, Glassnode predicted in a recent post.  

According to the blockchain analytics firm, just a tiny fraction of staked Ethereum would be sold after the upgrade. “We estimate a total of 170k ETH intended to be sold after the Shanghai upgrade,” the report predicts, which is less than 1% of the entire staked amount of 18 million ETH, concluding that “even the most extreme case will have an acceptable impact on the price of ETH.”

“We project that only 100k ETH ($190M) of the total accumulated rewards will be withdrawn and sold.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. Even in the extreme case where the maximum amount of rewards and stake are withdrawn and sold, the sell-side volume still falls within the range of the average weekly exchange inflow volume,” the firm said.

The Shanghai/Capella hard fork, scheduled for April 12, will allow stakers to withdraw their ETH funds that have been locked for Ethereum's new Proof-of-Stake consensus mechanism. Some of these funds have been staked since November 2020, before the Beacon chain went live, and stakers have not been able to access their ETH or their rewards since then. These rewards have been accumulating for more than two years, during which time ETH has gone through a full bull/bear market cycle. This has led to a lot of speculation about the possible market and supply effects when the approximately 18 million staked ETH ($33.92 billion, 15% of the total ETH supply in circulation) become available. The main concern is that the unlocks may cause a lot of ETH to be sold and temporarily create significant sell-side pressure for ETH.