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<h2 id="header-0">Analyzing the Market Response and Effect Shapella Has Had on the Ethereum ecosystem.</h2>While it was only an upgrade, Shapella brought about changes that have already had a significant impact on the Ethereum market and major implications for the future of the blockchain.The upgrade, which took place on April 12th, 2023, was a network upgrade that was primarily intended to allow Ether (ETH) withdrawals from the Beacon Chain deposit contract.Fortunately, traders and investors reacted positively to the news, leading to a surge in the price of ETH.This article will take a closer look at how the market responded to the upgrade and the effect it had on Ethereum’s price, and provide an analysis of the changes included and their implications for the future of Ethereum and ETH staking.<h2 id="header-1">What was the Ethereum Shapella upgrade?</h2>To recap, Shapella was the combination of the ‘Shanghai’ and ‘Capella’ upgrades. It introduced several significant changes to the network through various Ethereum Improvement Proposals (EIPs).Of all the EIPs, perhaps the most impactful on both a market and blockchain network performance level has been EIP-4895 enabling the release of ETH tokens locked in the Beacon Chain deposit contract since its inception in December 2020.Another big change has resulted in lower gas fees during periods of high activity to help Ethereum developers continue their work during busy times. <img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/b3eab246aed4488e8a06e47f9634ba34.png" />To learn more about the Shapella upgrade and the included enhancements, please check out this post:<a href="https://medium.com/ethereum-on-steroids/ef-combines-shanghai-and-capella-to-give-birth-to-the-latest-ethereum-upgrade-shapella-cedfee94026a" rel="noopener noreferrer nofollow">EF combines Shapella and Capella to give birth to the latest Ethereum upgrade — Shapella | by Daniejjimenez | ParaState | Apr, 2023 | Medium</a><h2 id="header-2">The market post-Shapella</h2>There is no doubt that Shapella has introduced a significant change to the Ethereum PoS network by enabling partial and full ETH withdrawals for the nearly 600 thousand active validators securing the network.Prior to this upgrade, there was a lot of controversy, back-and-forth, and FUD surrounding Ethereum’s future after its execution. Optimists viewed the ability to withdraw staked ETH as a huge benefit that would attract new investors and boost the network’s decentralization. Pessimists, on the other hand, predicted impending doom and tanking prices due to huge selloffs of staked ETH occurring right after the upgrade.Looking at ETH’s market performance before and after Shapella, the price managed to capitalize up to 11%, dispelling the unfounded FUD spread by the pessimists.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/e8f205b617794c34bc3e096cec3183cc.png" />The chart above of the ETH/USD pair shows a strong bullish candle that positively impacted the entire crypto market on April 13, right after Shapella and the activation of withdrawals. At the same time, this positive ETH price move enabled massive short liquidations of almost $90 million.It appears that most ETH stakers are not rushing to sell their ETH and are bullish about the future of Ethereum, expecting prices to rise as more people learn about the update and its impact on the ecosystem.So how is the market looking now?Ten days post-Shapella, at the time of writing this article, the euphoria and excitement seems to have died down a bit and the ETH has returned to pre-Shapella prices. The good news From our perspective is that the persistent selling pressure seems to have dissipated, and for now, ETH shows no signs of a catastrophic depreciation.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/3fb0c17732e741a088aeea1512cbdb82.png" />ETH traders have generally reacted positively to Shapella, preventing the ETH price from plummeting. Additionally, all data points indicate a stabilization of key metrics for the Ethereum blockchain: Staking APR, ETH price, % ETH unlocked, and # of validators securing the network.<h2 id="header-3">Withdrawals are decreasing</h2>Interestingly enough, the most recent data shows that over the last seven days, users are already staking more ETH than they’re withdrawing.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/1b54fa2a56de42ea940704732cddc1b1.png" />At the time this post was written, there were 46,172 deposits into the Beacon Chain deposit contract versus 2,316 withdrawals.To put this in a broader context, of the total 17,959,430 ETH that are available for withdrawal, only 4.78% or 27,748 are waiting for full withdrawal.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/4d647ec227ca47e5b410ce2af67c3e10.png" /><h2 id="header-4">Kraken dominates the exits</h2>It’s no surprise that after the SEC lashed out at Kraken’s staking as a service (SaaS) platform, the centralized exchange has and continues to dominate the withdrawal requests on the Ethereum blockchain.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/1d22e1ccd8bc4d9f9da01c4dee82ec81.png" />According to Nansen, Kraken accounts for the vast majority of exits, with 71.6%, well ahead of the next highest, Huobi Exchange.Overall, exits are being led by the biggest CEXs (central exchanges) in the ecosystem, including Kraken, Binance, Coinbase, and Huobi.<h2 id="header-5">DeFi: LSD Protocols awaiting withdrawal activation</h2>Another interesting observation is the neutral performance of protocols like Lido Finance that provide liquid staking tokens (LSDs/LSTs).Given that withdrawals from Lido are not scheduled to be enabled until May 2024 due to audits and the test network deployment, most liquid staking protocols have not shown a significant change post-Shapella.However, the sentiment in favor of greater decentralization for Ethereum, as reflected in the dominant exits from the major CEXs, suggests that dominant players in the LSD market, such as Lido, are likely to lose market share as emerging DVT (Distributed Validator Technology) staking solutions begin to deploy on mainnet in 2023.Although LSD stableswap pools have remained relatively ‘stable,’ on-chain metrics show signs of stETH selling pressure on protocols such as Aave, Compound, Balancer, and Curve. This pressure is likely to redistribute Lido’s concentration of power as Ethereum’s pro-decentralization narrative gains traction with DVT projects like SafeStake, Obol, and SSV Network.Our prediction is supported by stETH’s deviation from bonding, currently trading at a discount of 0.18%, compared to a 0.22% premium for rETH.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/618187cd3bd646bfb7de182f65cb36b2.png" />However, the exception in the LSD market is Coinbase’s staking program, with redemptions of over 67,270 cbETH for users post-Shapella.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/6695933f1d1f48a291a3232dfab4d525.png" />The two charts above are sending a clear signal that the LSD market may be impacted once Lido activates withdrawals on its protocol, increasing redemptions on centralized LSD protocols such as Coinbase and Lido, and steering the LTV into a more decentralized DVT-driven zone.<h2 id="header-6">What’s next for Ethereum?</h2>Shapella is a big deal for Ethereum as it means that more developers will begin working on applications using ERC-20 tokens, driving up demand for gas (transaction fees) and increasing its value over time.The Ethereum network is the most widely used blockchain ecosystem in the world. It has more developers, users, and use cases than any other platform. It’s also the most developed technology currently available.Ethereum has huge potential for growth thanks to its position as the leader in this space. From an investment standpoint, many institutional investment players are now showing interest in participating in Staking as a Service (SaaS), given the de-risking that Shapella brought by enabling ETH withdrawals.On the other hand, as more altruistic stakers move to smaller protocols in the interest of decentralization and security, we hope to see a redistribution of the market currently dominated by centralized protocols and exchanges.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/5d156bbc7f6849f7ba73494d8a712358.png" />In that sense, the post-Shapella performance of the LSD tokens of the main protocols that dominate the sector such as LDO (Lido), RPL (Rocket Pool), FXS (Frax) and SWISE (StakeWise) suggest that Ethereum has a bright future.Ultimately, Shapella should have a positive effect not only for ETH traders, but also for the price of all LSD, LSD-Fi, and L2 tokens that complement the Ethereum ecosystem.It is also worth noting that Shapella is the foundation for the next major upgrade also planned for 2023, EIP-4844, dubbed ‘Proto-Danksharding.’ EIP-4844 will implement long awaited sharding technology for Ethereum. Stay tuned for more information about that exciting upgrade coming this year!<h2 id="header-7">About SafeStake</h2>SafeStake is a trust-minimized middle layer that promotes decentralized ETH 2.0 staking. It is the first Distributed Validator Technology (DVT) liquid staking protocol for Ethereum written entirely in Rust. SafeStake utilizes the HotStuff consensus protocol and an advanced BLS Threshold Signature architecture to provide the highest levels of security and reliability, so Ethereum validators can maximize their staking rewards.<a href="https://www.safestake.xyz/" rel="noopener noreferrer nofollow">Website</a> | <a href="https://medium.com/ethereum-on-steroids" rel="noopener noreferrer nofollow">Blog</a> | <a href="https://twitter.com/SafeStakeDVT" rel="noopener noreferrer nofollow">Twitter</a> | <a href="https://t.me/ParaState" rel="noopener noreferrer nofollow">Telegram</a> | <a href="https://discord.com/invite/zFS3Mnfpwj" rel="noopener noreferrer nofollow">Discord</a> | <a href="https://github.com/ParaState" rel="noopener noreferrer nofollow">Github</a>

ETH Traders React to the Shapella Upgrade: A Closer Look at Market Trends

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