How Advisors Can Prepare for Ethereum’s Unlock
Ethereum’s Shanghai upgrade will unlock any ether that has been staked since the Merge, potentially leading to selling pressure that market participants could either ride out or exploit.
On April 12th, 2023, the Ethereum network will undergo its next upgrade, called Shanghai. Once implemented, this will free up all ETH that has been staked since the “Merge.”
In September 2017, Ethereum underwent the Merge – an upgrade to its blockchain that marked a paradigm shift from proof-of-work (PoW) technology to proof-of-stake (PoS).
One key advantage of the upgrade to Ethereum’s network is that individuals can now run validator nodes, using their own ether to help protect it in the absence of traditional mining infrastructure which had safeguarded Ethereum since its inception.
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Market participants are motivated to stake their ether because they can now receive rewards in ETH from the network for their staking contributions. It no longer requires substantial upfront investments into mining hardware and software in order to reap these blockchain rewards from the Ethereum network.
Staking Ethereum after the upgrade had a downside in that those involved (or those running validator nodes) had to stake their ETH until the next upgrade. This inability of holders of ETH to sell off their coins created an illiquid pool of tokens which were unavailable for sale during recent months.