The Ethereum Shanghai upgrade is coming soon, and it’s going to be a big one.
The upgrade will introduce a number of new features, including the ability to withdraw staked ETH, improved efficiency of the Ethereum Virtual Machine (EVM), and support for compressed transactions.
These changes will make Ethereum more scalable, more efficient, and more secure. So if you’re invested in Ethereum, or if you’re just interested in learning more about cryptocurrency, then you need to watch this video. I’ll tell you everything you need to know about the Shanghai upgrade, including what it is, when it’s happening, and what the benefits will be.
So, let’s start with the main advantages of the upgrade and how investors can benefit from trading the volatility surrounding it.
This post is available in video format too. You can check it out here or continue reading below.
This is the first major upgrade to the Ethereum network following the Merge from back in September 2022. It was originally scheduled for March 15, this year, but was delayed to April 12, due to some last-minute issues. The upgrade upgrade will introduce a number of new features, including:
- EIP-3651 Warm COINBASE
- EIP-3855 PUSH0 instruction
- EIP-3860 Limit and meter initcode
- EIP-4895 Beacon Chain withdrawals
Now, let’s discuss the main one from all of these:
EIP-4895
EIP stands for Ethereum Improvement Proposal – Generally, new features are first introduced as proposals, then if they’re approved by the community, they get added via such upgrades. This EIP will allow users to withdraw their staked ETH from the Ethereum 2.0 Beacon Chain. It’s been a couple of years since people first staked their ETH, so this is definitely a big moment for many investors who might be willing to unlock or unstake I should say, their Ether.
What are the benefits of it?
There are a number of benefits to including:
Increased liquidity: this is because the upgrade will allow users to withdraw their staked ETH at any time. This will make it easier for users to use their ETH for other purposes, such as trading or investing.
Improved security:
EIP-4895 will improve the security of the Ethereum network by reducing the amount of ETH that is locked up in the Beacon Chain. This will make it more difficult for attackers to accumulate a large amount of ETH and launch a successful attack on the Ethereum network.
Increased flexibility: EIP-4895 will increase the flexibility of the Ethereum network by allowing users to withdraw their staked ETH at any time. This will give users more control over their ETH and make it easier for them to participate in the Ethereum ecosystem.
What about the risks?
Well, of course, there are also some risks associated with the upgrade.
As always, there is a possibility of bugs:
Any major software upgrade carries the risk of bugs. If there are bugs in the code, it could lead to problems with the Ethereum network, so we will soon find out how this will play out.
There’s also the possibility that the upgrade could make Ethereum more vulnerable to attacks. If attackers are able to exploit a vulnerability in the EIP-4895 code,
they could potentially disrupt the Ethereum network.
And also, let’s talk about how can this upgrade affect the price volatility.
The main thing about this upgrade seems to be the un-staking. This is what all the hype is about.
Currently, users are not able to withdraw their staked ETH, and that’s been the case ever since late 2020, when the first staking on ETH 2.0 occurred.
This means, that users have technically locked huge amounts of Ether into the Ethereum 2.0 protocol for an indefinite period.
EIP-4895 will change this by allowing users to withdraw their staked ETH at any time and this is why the market value of Ether could be greatly affected. At least in the short term.
The minimum amount of ETH required to be staked to the ETH2.0 protocol is 32 ETH. This is a huge amount by any measure, but this was because the Ethereum network is designed to be decentralized and secure. In order to achieve this, the network requires a large number of validators to participate in the consensus process. By requiring validators to stake a minimum of 32 ETH, the network ensures that they have a significant financial incentive to act honestly and in the best interests of the network. At least this is the idea behind it. You could argue, that this becomes a centralization issue to some extend, due to the not so vast number of individuals who could afford this kind of stake, but that is a topic of a separate video.
So, talking of the price of Ether being affected, I do expect some selling pressure to occur when un-staking becomes possible.
Especially from those early stakers, who jumped at the opportunity in the first weeks, given that the price of ETH in December 2020 (when staking first started), was around $570, just under $600 in fact, and today the price is edging towards $2000 per token, so there could be some profit taking. Definitely.
I don’t think it will be in copious amounts though, after all, many of these are long term hodlers and it would be silly to think that everyone will want to exit their holdings right away. Especially since we are on our way our of another long crypto winter. We are in fact in the accumulation stage before another major bull cycle, but that’s the long term. In the immediate term, I do expect a selling pressure as people book profits and take advantage of the price swings. It’s the typical buy the news, sell the event type of trade for many, so if you’re buying ETH right now as we are already at resistance levels, you are taking a risk. Another thing is, usually, experienced traders don’t wait for the event to occur and they start dumping their bags days before the actual event, so now that Ether is so close to the 2000 mark, it seems to be right time for the selling to begin. Maybe another push to just touch the psychological resistance of 2000 and then most likely we will see the correction begin.
How am I trading this?
I am with one finger on the sell button. Sort of. I have placed some sell orders and I am still holding a large position in ETH that I will start unloading as soon as I see the pullback begin. I don’t try to catch the ultimate top or bottom, I usually wait until I see where the price finds the rejection, when I get confirmation that the peak has been reached and we are now starting to drop, this is when I unload. I also unload on the way up, but in smaller quantities, because you could end up selling too early and prices sometimes can jump much higher than you’d expect, so this is how I am playing such pumps, but this is not financial advice, it’s just what works for me. You have to make up your own strategy and follow your own rules.
IN CONCLUSION:
The Shanghai upgrade is a significant upgrade to the Ethereum network, which is expected to bring several significant improvements. The upgrade will improve the network’s scalability, security, and efficiency. Investors can benefit from the volatility surrounding the upgrade by taking advantage of the price movements that are likely to occur. As always, we recommend that investors do their research and invest wisely.
☝These are my opinions, not financial advice, always DYOR.
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The information contained in this video is for informational purposes only. Nothing herein shall be construed to be financial or legal advice. The content of this video reflect solely my own opinions. Purchasing cryptocurrencies poses considerable risk of losses.
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