Ether (ETH) Reaches $2,000 After Successful Shapella Upgrade

In a continued display of strength in the cryptocurrency market, Ether (ETH) has climbed above $2,000 on Thursday afternoon, a day after Ethereum completed the long-awaited Shapella upgrade. With this significant price surge, ETH, the second-largest cryptocurrency by market value, was recently trading at $2,015, reflecting an increase of more than 5% over the past 24 hours.

SHANGHAI FORK: AN ENERGY-EFFICIENT TRANSFORMATION OF ETHEREUM NETWORK

The Ethereum Shanghai hard fork, which is also known as Shapella, is part of the ongoing transformation of the Ethereum network from a proof-of-work (PoW) to a more energy-efficient proof-of-stake (PoS) consensus. This transformation began in September 2021 with the Merge. Market observers had diverged over ETH’s price reaction to the Shapella upgrade, with some predicting that selling pressure would send the price down, while others seeing little impact or even an increase.

DISSUADING ETH SELL-OFF WITH DECREASED SUPPLY AND INCREASED DEMAND

According to Diogo Mónica, president and co-founder of institutional crypto platform Anchorage Digital, investors will be more comfortable locking in ETH, leading to decreased supply. This, in turn, has increased demand, which are the two main reasons why the price is not going to drop massively. However, institutional investors will “stay on the sidelines” from staking – at least for the moment, as validators looking to exit the chain would have to join an exit queue. It’s unknown how the exit queue will behave in the next few weeks, and whether a pattern of liquidity will emerge such that institutional investors can start staking comfortably.

MARKET OBSERVERS’ CONCERNS AND COINBASE RESEARCH REPORTS

Market observers remain concerned about the Shapella upgrade’s impact on ETH’s price, as it will depend less on “technicals” and more on “what risk actually does at that time,” according to a report from Coinbase Research prior to the upgrade. If the trading environment sees risk assets selling off, people may decide to un-stake and sell ETH just to de-risk, while institutions may not step in as aggressively on the buy side.

BITCOIN RISING AND INSTITUTIONAL ADOPTION

Meanwhile, in the broader cryptocurrency market, Bitcoin (BTC) rose 1.8% for the day to change hands at around $30,375 Thursday afternoon. Among institutional investors, the key question has been whether BTC is an uncorrelated asset, according to Mike Belshe, CEO of custody provider BitGo, in an emailed comment. Institutional adoption is “about to kick into high gear,” despite regulatory headwinds.

CONCLUSION

The Shapella upgrade has increased demand for ETH, leading to its price increase. The broader cryptocurrency market is currently witnessing increased institutional adoption, with Bitcoin and liquid staking derivatives’ token prices also on the rise. It remains to be seen how the market will react in the coming weeks, but the signs are pointing towards a positive trend for the cryptocurrency market.

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