The Ethereum network has seen a major shift since the Shanghai upgrade went live on April 12, enabling staking redemptions for the first time. Nonetheless, ETH selling pressure has been nothing more than a “non-event”, according to blockchain analytics firm Nansen. The upgrade marked Ethereum’s full transition to a proof-of-stake blockchain, with ETH staking deposits surpassing withdrawals and sending the number of staked ETH to an all-time high of 19.55 million at press time. As such, the May 8 report postulated that the elimination of unstacking risks has been able to offset selling pressure from withdrawals.
Decline in ETH Price and Market Index, High Withdrawals from Kraken and Coinbase
Despite this good news, the price of ETH has decreased by 8% to $1,851 since April 13, and the CoinDesk Market Index, designed to measure the broad performance of the digital asset market, has dropped nearly 10%. Crypto exchange Kraken, which ended its crypto staking-as-a-service platform for U.S customers in February due to regulation from the Securities and Exchanges Commission, had the most withdrawals at 646,000 ETH. Coinbase followed with 376,000 ETH withdrawn.
However, a greater portion of the ETH withdrawn from staking is from crypto exchanges (CEXs) withdrawing ETH for their own internal operations instead of for selling on the market. Roughly 73% of the ETH withdrawn from staking has been sent to centralized exchanges like Kraken and Coinbase, which nevertheless signal a surge in confidence from investors for the Ethereum network and the asset itself.
Institutional ETH Staking Increases Threefold Post-Shanghai EIP, Reports ConsenSys Analyst
According to Michiel Milanovic, analyst of Ethereum blockchain developer firm ConsenSys, top institutional-grade ETH staking service providers have reported a threefold increase in April compared to all of last month, 80% of which happened post-Shanghai. This surge of interest in staking is due to the reduced liquidity risk associated with locking up ETH for staking, which has been made possible by the Shanghai Ethereum Improvement Proposal (EIP).
The EIP has enabled ETH staking to become more accessible to institutional investors, resulting in a threefold increase in staking activity in April compared to the previous month. This has opened up new opportunities for institutional investors to benefit from staking rewards and has further strengthened the Ethereum network.
Increased ETH Staking Post-Shanghai Upgrade
A survey by Kiln, another institutional-grade staking service provider, reported that 68% of investors intend to start staking or increase their amount post-Shanghai. Kiln’s co-founder and COO Thomas de Phuoc revealed that their sales team had discussed with traditional finance and brokerage firms in the U.S. and Europe.
Since the Shanghai upgrade, Kiln has recorded $47 million (24,640 ETH) of new deposits, whereas Staked.us has booked an impressive $111 million (58,592 ETH) in inflows, more than double the amount of ETH withdrawn.
Positive Start for Shanghai Upgrade with High Institutional Interest in ETH Staking
Overall, the Shanghai upgrade has had an impressive start, particularly with the influx of interest from institutional investors. Withdrawals have been minimal and surpassing inflows, demonstrating the strength of investors’ confidence in Ethereum.
It will be interesting to see the effect of the upgrade over the coming months as more rewards become unlocked, with Milanovic urging caution as not all staking providers have enabled withdrawals straight away.
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