18 million eth, accounting for 15% of ethereum’s total supply, is locked in the Beacon chain but only until Wednesday.
The unlock upgrade, dubbed Shapella, will for the first time in more than two years allow for withdrawals of the 32 eth amount locked for staking.
Some have already began the exit process. A random account we came across for example, which started staking on the first of December 2020, is in the process of exiting.
They have gained 4 eth on that 32 amount deposited, a 12% gain in over two years, or 6% a year.
Few assets of scale provide such returns, discounting the underlying volatility of eth itself, especially considering staking will become less risky as there won’t be an uncertain lockup period.
On the other hand in the short term new supply might hit the market, but a rush to exit has not quite been seen so far, although 3,594 validators have already began the process according to blockchain data.
Withdrawals will be gradual and processed through a queue as they will be limited to 16 validators per block.
That amounts to circa 100,000 validators a day, suggesting it won’t take long to withdraw and yet still some are trying to frontrun the queue.
On the other side, there’s a queue of pending validators waiting to join at about 42. At times this rises to a thousand or more, but with an upgrade in just days prospective validators might first be waiting to see how it goes.
Usually ethereum upgrades go through without any problems, though you can never tell as bugs do sometime happen, but then you just update the network.
More attention instead, where the market is concerned, will be on liquid staking tokens like Lido and their stETH, which is the biggest.
There are currently close to 6 million stETH, but one steth is worth a bit less than an actual eth, it going for about 0.98 eth.
This made sense when the eth was locked to account for the higher uncertainty in regards to the unlock period, but after Wednesday direct arbitraging between stETH and eth should be possible which may lead to a repricing.
“Short-term market volatility is to be expected,” says Chen Zhuling, Founder and CEO of RockX, a startup that offers non custodial eth staking.
“With the Shapella Upgrade, the liquid staking landscape will be transformed forever, and Ethereum will become the benchmark yield for crypto,” he claims.
What the effects of staking becoming two ways will be is to be seen in now just days, but the new ability to arbitrage between eth and staked eth tokens may make the market more efficient.
Some such tokens are at a premium, like rETH which trades at 1.067 eth for their 230,000 tokenized eth, or Coinbase’s cbETH at 1.02 eth for some 640,000 cbETH.
If some of this premium is simply due to the inability to arbitrage, then the unlock may put upwards pressure on eth, but stETH is far bigger and they’re at a slight discount currently.
Ethereum itself has been rising however recently with any price related effects by the upgrade likely to be temporary, while the potential demand related effects due to the new yield might be more long term.
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- Source: https://www.trustnodes.com/2023/04/10/etherean-stakers-get-ready-to-exit
