- The Shanghai Hard Fork upgrade is scheduled for April 2023.
- Currently, Ethereum is trending around $1750, up more than 45% from January 2023.
- The Shanghai fork is a highly anticipated upgrade because ETH holders have been waiting for the last two years before they can unlock their staked Ethereum. Will it lead to a potential sell-off?
What is the Ethereum Shanghai Upgrade (EIP 4895)?
The major upgrade in September enabled Ethereum’s Beacon chain to update from Proof of Work consensus to Proof of Stake mechanism. It means the governance mechanism has switched from a resource-intensive method to an eco-friendly mechanism.
Now Ethereum’s mainnet relies on validators and not on ETH miners. Ethereum holders need to stake a minimum of 32 ETH in the consensus mechanism to take part as a stakeholder.
The Shanghai update is expected to occur in April 2023, which is the first major upgrade after the Merge. It is also anticipated to have economic implications and may influence the ETH price. Let’s take a deep dive into the details and understand how it can affect the Ethereum price in the future.
Ethereum Improvement Proposals (EPIs)
The Ethereum Shanghai upgrade features 5 Ethereum Improvement Proposals (EIPs), and these will be launched as a part of the upgrade. The most anticipated one is EIP-4895 which will allow both validators and stakeholders to withdraw the ETH staked in the last 2.5 years in Beacon Chain.
Besides that, the Shanghai Upgrade will also feature the following:
EIP-3651: Coinbase payments will become more popular. As a result, it will enhance transaction speed and security.
EIP-3855: It will introduce PUSH0 instruction to contracts. As a result, it will reduce the need for DIP instruction, reducing the contract code size.
EIP-3860: It will enhance the performance of EIP-170, minimizing future risks.
EIP-6049: It will warn against the self-destruct instruction on a smart contract. However, another change in this EIP will likely come in the future.
However, the upgrade does not mention EIP-4844, which is also known as the Sharding Upgrade.
What Does the Ethereum Shanghai Upgrade Mean for ETH Users?
The exact effects of Ethereum’s Shanghai upgrade will depend on your role in the network. If you are a stakeholder, you can liquidate your funds after this upgrade. It is a relief for the stakeholders waiting for the facility for the last three years.
This liquidity may impact the traders after the update because it will unlock the staked ETH. For investors and traders, the percentage of withdrawing stakes and the increase in supply are some aspects that need to be monitored.
On the other hand, staking ETH will be more attractive for the users, so it could lead to more demand for ETH coins because of this improved staking condition.
The Shanghai upgrade will make some changes in the node, so nodes need to be upgraded to be a part of this network. There is no direct impact on the users. Indeed, the price of Ethereum could be volatile after this upgrade, but the price will be adjusted in the next few months. Overall, the Shanghai upgrade will positively affect the ETH pricing reducing the artificial control on the price and circulation.
Analysis: Will the Shanghai Upgrade Affect the Ethereum Price?
With the introduction of EIP-4895, now the stakeholders can withdraw their staked ETH. Many users fear that the update will result in a crash in ETH price, but the probability is less. Many experts think the popularity of staking will increase. The number of validators will rise, and the excessive demand will appreciate the value of ETH.
Ethereum’s large whale investors are accumulating the altcoin before the Shanghai upgrade. Based on the Sentiment data, large wallets are accumulating the altcoin. Retail investors have also increased participation. The address count has reached an eight-month high. Overall, the sentiment indicates the second-largest cryptocurrency (by market capitalization) will rise after the Shanghai upgrade in April 2023.
Ethereum is consolidating within a range of $1718 and $1815. Though candlesticks are forming above the 50-day moving average, the price faces resistance around $1800. The Relative Strength Indicators are around 60, which suggests a bullishness in the next few months, probably after the Shanghai update.
If it breaks the consolidation in the downside correction, the price will take support above the 50-day MA of around $1600, which could be the right time to invest in ETH USD.
Find out the potential price levels of ETH in the coming days by checking out our projection, which also answers the question that’s on everyone’s mind: “Will Ethereum go up?“
Should You Buy Ethereum Now?
Ethereum’s Shanghai upgrade is a highly anticipated beneficial change in the Ethereum network, such as stake withdrawing, which will increase liquidity. So large Ethereum whales are accumulating the altcoin leading to a higher price of ETH. It is the right time to invest in Ethereum, the largest altcoin by market cap, and stay invested for the next few years for a better return.