On Wednesday, the software supporting Ethereum (ETH), the second-largest cryptocurrency, is scheduled for an upgrade. This upgrade, called Shapella, will provide investors with access to over $30 billion in digital tokens. Through this latest upgrade to the Ethereum blockchain, investors will be able to redeem an offshoot of their ETH tokens deposited in the network over the past three years in exchange for interest.
According to data firm Dune Analytics and a report from Reuters, the “staked ETH” tokens, which make up approximately 15% of all ETH tokens, are valued at around $31 billion. Tim Beiko of the Ethereum Foundation, an organization that represents the Ethereum network, tweeted that the upgrade is expected to take place around 22:30 GMT.
The Impacts of the Latest Ethereum Upgrade
Traders and investors agree that the changes will almost certainly result in an increase in Ethereum’s already high level of volatility. Some others fear that extensive redemptions could result in a wave of selling, which would then put pressure on the price of ETH, the second most valuable cryptocurrency behind Bitcoin (BTC) with a market value of over $230 billion.
According to analysts at Deutsche Bank, the realization of this previously unrealized investment could result in severe downward price pressure in the event that it is quickly liquidated. In September, Ethereum had its most recent substantial upgrade, which significantly cut the amount of energy it consumed. This was a move that supporters of Ethereum believed would give Ethereum an advantage as it competes with Bitcoin.
But Ethereum has continued to lag behind its major competitor, Bitcoin, which has seen a gain of more than 80% this year while Ethereum has increased by just under 60%. Following a rough year for the cryptocurrency market in 2022, in which trillions of dollars were lost, the industry has seen a rebound in 2023 on the back of forecasts that the frequency of interest rate hikes by central banks will reduce.
Ethereum’s use in so-called decentralized finance (DeFi) applications—which provide financial services while avoiding traditional sector gatekeepers like banks—has become increasingly common. These applications have helped Ethereum gain popularity. However, it is still not widely used in conventional business or financial transactions.
