The upcoming activation of the Shapella upgrade has caused concern among Ethereum (ETH) enthusiasts regarding its potential impact on the tokenomics of the popular cryptocurrency. However, according to top analyst Chris Burniske, there may be a positive outcome from this upgrade that is being overlooked.
The Shapella upgrade is the first major post-Merge Ethereum upgrade and represents the final stage of its transition from proof of work to the proof-of-stake consensus. This move is intended to enhance the security and scalability of the Ethereum network, whilst also enabling Ether (ETH) withdrawals from staking contracts. As a result, a significant amount of Ether may be released on markets, which has caused concern among some investors.
However, Chris Burniske has taken a different view and believes that the Shapella upgrade, specifically the ability to “unstake” Ether, is a de-risking factor that will make ETH staking more attractive to investors. In a recent tweet, he stated that “Shanghai de-risks Ethereum staking, expect the % of $ETH staked to 2-4x in the quarters following it. Those are bullish flows, not bearish. Expect volatility, but don’t get faked out.”
In other words, Burniske believes that rather than panic-selling, there will be a substantial increase in the share of Ether supply locked in staking contracts as more Ethereum enthusiasts with various deposits join this ecosystem. As such, the activation of Shanghai will result in increased volatility, but not in a price dump.
Furthermore, Burniske highlights that Ethereum staking is still in its early stages with only 15% of Ether staked. In comparison, Ethereum-competitors Cardano (ADA) and Solana (SOL) have about 70% of their respective cryptocurrencies staked. Previously, Ethereum holders avoided staking their deposits because the inability to withdraw funds made the strategy too risky. With the option to unstake, however, it is expected that more ETH holders will enter the staking ecosystem.
Despite concerns that all available Ethereum supply might migrate to Bitcoin due to the increased risk of staking, Burniske believes that such a scenario is unlikely. He tweeted that “The other 85% of unlocked $ETH can flee from Ethereum to Bitcoin as it pleases. Time to hang up the tired narrative, both $BTC and $ETH are quality assets.”
Currently, Ethereum is trading at $1,822, representing a 4.4% increase in the last 24 hours, and reportedly reached the highest levels since August 2022.
The activation date of Shapella has been set for April 12, 2023, at about 10:27 p.m. UTC, with Ethereum core dev Tim Beiko posting that Ethereum developers have successfully activated Shapella in the Goerli testnet, which is the most popular Ethereum testnet. The testing of Shapella in the Goerli testnet is expected to provide additional insights into the upgrade before its actual implementation on the Ethereum mainnet.
The implementation of the Shapella upgrade is anticipated to transform the Ethereum network from proof of work to proof-of-stake consensus, resulting in increased network security and scalability. The upgrade also offers investors the ability to unstake Ether, which is expected to attract a significant proportion of Ethereum enthusiasts with various deposits to join the staking ecosystem. While the activation of Shanghai may result in increased volatility, it is not expected to cause a price dump, as some investors fear. As such, Ethereum still remains a quality asset to invest in, alongside Bitcoin.
