BENGALURU – Investors are finally set to gain access to more than US$33 billion (S$44 billion) of Ether this week under a planned revamp of the blockchain.
A new software upgrade to the Ethereum blockchain, dubbed Shapella, will let market players redeem their staked Ether – coins they have deposited and locked up on the network over the past three years in return for interest.
About 15 per cent of all Ether is staked, totalling US$33.73 billion in market value, according to data from Dune Analytics.
Up to 1.1 million Ether tokens will be ready for withdrawals in the week following the revamp of the blockchain, estimated Dr Sreejith Das, chief executive at Attestant, a company that facilitates the staking of Ether.
This would be worth nearly US$2 billion, based on the latest Ether price of about US$1,860.
Traders are now trying to figure out how this sudden Ether windfall might hit prices. It is difficult to judge though, said Mr Robert Quartly-Janeiro, chief strategy officer at crypto exchange Bitrue.
Some corners of the market are worried that unlocking staked coins could lead to massive withdrawals and a wave of selling, which could push prices rapidly lower.
Yet only about 29 per cent of all Ether staked by volume is currently in profit in US dollar terms, which would mean most would be sold at a loss, according to Mr Bundeep Rangar, CEO of blockchain investment firm Fineqia International.
“It seems unlikely, therefore, that much of the staked Ether will be sold,” Mr Rangar added.
Shapella would mark the end of a long wait for investors who had opted to deposit Ether in exchange for a yield since the staking project began in 2020.
Ethereum developers paved the way for this development with a major upgrade called the “Merge” last year, which ditched energy-intensive mining and moved to a proof-of-stake system where Ether owners lock up 32 coins to check new records on the blockchain, earning new Ether on top of their staked coins.
Until the planned revamp this week, investors looking to stake coins had to deposit a minimum of 32 Ether tokens at a time – worth US$59,520 at current prices – for an indefinite period, a hefty sum beyond the reach of the average retail investor.
After the upgrade, staked Ether will no longer be locked up on the blockchain, so investors may be more willing to stake coins.
The market value of tokens behind Lido Finance and Rocket Pool, two of the largest projects providing liquidity for crypto staking, has soared nearly six times to US$2 billion and four times to US$875 million respectively this year, according to CoinMarketCap, on expectations of further growth.
“It is likely that in the long term, the amount of Ether staked will increase, especially in comparison with the percentage of supply staked for other digital assets such as Solana, Matic and Ada,” said Mr Rangar. REUTERS
