🧵: The Ethereum Shanghai upgrade will happen in March.
Here’s a breakdown of the likely price impact
… and why it will lead to a renaissance in non-custodial staking (Important)! 👇
Here’s a breakdown of the likely price impact
… and why it will lead to a renaissance in non-custodial staking (Important)! 👇
1/ What is the Ethereum Shanghai upgrade?
The Shanghai upgrade will allow stakers to withdraw ETH that has been staked since December 2020.
It will be implemented EIP-4895.
The Shanghai upgrade will allow stakers to withdraw ETH that has been staked since December 2020.
It will be implemented EIP-4895.
2/ The Shanghai upgrade is scheduled for March 2023 and is probably one of the most important in-house crypto events of 2023.
3/ Some argue that the unlocking of staking rewards will be extremely bearish because stakers are tempted to immediately get rid of their coins.
… which leads to a flash crash.
… which leads to a flash crash.
4/ Others argue that the Shanghai upgrade will be extremely bullish because it removes barriers of entry to stake, which means that the staking ratio will grow.
Let's break down 3 possible scenarios:
Let's break down 3 possible scenarios:
6/
1️⃣ Withdraw everything
The first option is to withdraw and sell everything. Stakers took high risk for almost three years and finally have to option to claim their rewards.
This is the easiest scenario to imagine but also (in our opinion) the least likely scenario.
1️⃣ Withdraw everything
The first option is to withdraw and sell everything. Stakers took high risk for almost three years and finally have to option to claim their rewards.
This is the easiest scenario to imagine but also (in our opinion) the least likely scenario.
8/
2️⃣ Stakers do nothing
Everything is priced in & stakers leave their stake as it is.
2️⃣ Stakers do nothing
Everything is priced in & stakers leave their stake as it is.
9/
3️⃣ Stakers double down
The third scenario is that stakers use this opportunity to double down and stake even MORE $ETH.
3️⃣ Stakers double down
The third scenario is that stakers use this opportunity to double down and stake even MORE $ETH.
10/ A few reasons arguments for this:
✅ rewards can now be withdrawn
✅ lower risk
✅ staking rewards are finally “real”
✅ rewards can now be withdrawn
✅ lower risk
✅ staking rewards are finally “real”
11/ Some even argue that the third scenario is the most likely because many soon-to-be-stakers have been sitting on the sidelines waiting for the upgrade.
12/ Even JP Morgan expects that the staking ratio will increase from 14% to 60% - as it is the case with other PoS systems.
coindesk.com
coindesk.com
13/ They expect that the number of validators could reach almost 2.2 million.
Of course that also means that the staking rewards would fall.
From 7% to 5%.
Of course that also means that the staking rewards would fall.
From 7% to 5%.
14/ What does it mean for decentralization?
We are facing a tough regulatory landscape.
Some expect this will bring forth a renaissance in non-custodial staking and therefore strengthen decentralization of our ecosystem.
We are facing a tough regulatory landscape.
Some expect this will bring forth a renaissance in non-custodial staking and therefore strengthen decentralization of our ecosystem.
15/ While this could be correct, we see some challenges here.
Funds that were previously staked with CEXs could now flow into liquid staking services like Lido.
Funds that were previously staked with CEXs could now flow into liquid staking services like Lido.
16/ While Lido is certainly more decentralized than CEXs, it’s not perfect as well.
17/ The Lido validator set will remain controlled by a few entities until permissionless validator set is introduced.
18/ Conclusion:
✅ Shanghai upgrade will happen in March
✅ It’s unlikely that price impact will be highly negative since it’s high conviction stake
✅ Staking rewards will fall to 5%
✅ A renaissance in non-custodial staking is possible
✅ Problems with decentralization remain
✅ Shanghai upgrade will happen in March
✅ It’s unlikely that price impact will be highly negative since it’s high conviction stake
✅ Staking rewards will fall to 5%
✅ A renaissance in non-custodial staking is possible
✅ Problems with decentralization remain
19/ Please note that nothing in this thread was financial advice. Always do your own research, Frens! <3
20/ If you enjoyed this thread, please feel free to share it with your Frens 💛🤝
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