Ether (ETH) Breaks Out Ahead of Shanghai Upgrade

The world of cryptocurrency has been abuzz with the news of the upcoming Shanghai upgrade of the Ethereum blockchain, scheduled for April 12. According to a research report by Bernstein, ether has gained 6% in the last twenty-four hours and is showing early signs of relative strength versus bitcoin. This comes as a surprise to many, given that ether has underperformed bitcoin by 14% this year.

Ether (ETH) Breaks Out Ahead of Shanghai Upgrade: Is it the Right Time to Invest?

Ethereum’s Shanghai upgrade, scheduled for April 12, has gained the attention of investors as ether (ETH) gains 6% in the last 24 hours. Despite underperforming bitcoin (BTC) by 14% this year, ether is now breaking out ahead of the upgrade, according to a research report by Bernstein. In this article, we will discuss the Shanghai upgrade, ether’s recent performance compared to bitcoin, early signs of relative strength, and more importantly, whether it is the right time to invest in ether.

Ethereum’s Shanghai Upgrade: What Is It?

The Shanghai upgrade is the latest upgrade to the Ethereum blockchain. It will enable the withdrawal of staked ether (stETH). The upgrade will make the network more efficient, faster, and more secure. The withdrawal of staked ether will give more confidence to investors to stake their ether, which in turn will lead to increased network security.

Ether’s Recent Performance vs. Bitcoin (BTC)

Ether has underperformed bitcoin (BTC) by 14% this year, according to Bernstein. However, the recent gain of 6% in the last 24 hours has shown early signs of relative strength. Despite this, the long-term performance of ether has been impressive, with a year-to-date return of 165%, compared to 100% for bitcoin.

Rally into Merge

The move higher by ether is reminiscent of when it rallied into the Merge, which was the most recent upgrade of the Ethereum blockchain that took place in September 2021. This could be an indication that the Shanghai upgrade is already generating excitement among cryptocurrency traders.

Withdrawal of staked ether (stETH)

The Shanghai upgrade will enable the withdrawal of staked ether, which has been a major concern for investors. There were fears that post the upgrade, there would be a supply overhang as stakers could withdraw their ETH deposit and rewards. However, nearly 70% of staked ether is via liquid staking protocols such as Lido, which allows investors to sell their stETH regardless. This means that liquidity for 70% of staked ETH is not new, and they could do it anyway.

Directly staked ether

The remaining staked ether has been directly staked into the beacon chain and is therefore unlikely to be short-term holders. These investors deposited their ETH in December 2020 when there was significant uncertainty about whether the transition to proof-of-stake would succeed.

More confidence for holders to stake

The ability to deposit and withdraw ether easily gives more confidence for holders to stake, and those on the sidelines are more likely to stake now. This is good news for Ethereum as it moves closer to transitioning to a proof-of-stake consensus mechanism.

Conclusion

With the Shanghai upgrade just around the corner, it is evident that ether is outperforming bitcoin, and there is a growing interest in the cryptocurrency. The ability to deposit and withdraw ether easily gives holders more confidence to stake, which is likely to boost the value of ether in the long term.

FAQs

Q1. What is the Shanghai upgrade of the Ethereum blockchain?

A1. The Shanghai upgrade is the upcoming upgrade of the Ethereum blockchain scheduled for April 12, 2022.

Q2. Why has ether underperformed bitcoin this year?

A2. Ether has underperformed bitcoin by 14% this year, but it is now breaking out ahead of the Ethereum blockchain’s planned Shanghai upgrade.

Q3. What is staked ether (stETH)?

A3. Staked ether refers to ether that has been deposited into the Ethereum network as a way of securing the network and earning rewards.

Q4. Why is there concern about the withdrawal of staked ether after the Shanghai upgrade?

A4. There were fears that post the upgrade, there would be a supply overhang as stakers could withdraw their ETH deposit and rewards.

Q5. How does the ability to deposit and withdraw ether easily give more confidence to holders to stake?

A5. The ability to deposit and withdraw ether easily gives holders more confidence to stake, which is likely to boost the value of ether in the long term.

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