Ether is rising ahead of the upcoming Shanghai-cappella (dubbed Shapella) upgrade on Ethereum set to occur on April 12.
Ether was trading at $1,897 by 1:30 p.m. EDT, up 1.5% over the past few hours, according to Binance data via TradingView. The volume of ETH/USDT, the most popular trading pair with 9.1% of market volume, has increased to $1.04 billion. Bernstein analysts said it is breaking out into the "Shanghai catalyst" in a note on Wednesday.
The Shanghai upgrade will enable withdrawals of staked ether that was deposited onto the chain ahead of The Merge in September.
While ether has underperformed bitcoin this year by about 14%, the second largest cryptocurrency by market cap is in a "break-out pattern," according to Bernstein analysts led by Gautam Chhugani. The investment bank compared the move to the price increases seen ahead of The Merge — when ether last traded above $1,900.
There had been a long-held narrative that this upgrade would be a bearish event for ether, Matt Kunke, research analyst at GSR, told The Block, saying some thought Shapella would "introduce material sell pressure as staked ether becomes withdrawable for the first time." That pessimism has begun to dissipate, replaced with a "more nuanced understand of the ether staking backdrop," Kunke said.
The largest segment of ether stakers without any liquidity are solo stakers, he added, and this cohort is "most ether-aligned" of any and, as such, "least likely to exit in full, having already jumped through the non-trivial hurdles to help secure Ethereum directly."
Ethereum also has a queue mechanism to spread validator exits over weeks to months, preventing a liquidity cliff, Kunke said, adding that Shapella is a "material derisking event" for ether stakers. GSR expects the total stake securing the Ethereum network to grow meaningfully this year, regardless of a temporary blip downward as some validators exit.
Noelle Acheson, writer of Crypto is Macro Now newsletter, echoed this sentiment, pointing to a report by research firm K33 which notes that most staked ether belongs to "long-term network participants who are unlikely to exit at this stage."
"On the other hand, the upgrade could make staking more attractive through its additional flexibility, and the offered yield of almost 5% could start to look even more attractive should treasury yields continue to drop," Acheson added.
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