On 12 April, Ethereum’s Shanghai/Capella hard fork will allow for the withdrawals of staked Ether for its Proof-of-Stake consensus mechanism.
Segmenting Ether depositors for assessment
According to a report by Glassnode, only a small fraction of staked ETH is expected to be withdrawn and sold. The report estimates that of the total accumulated rewards, only 100k ETH ($190M) will be withdrawn and sold, with only 70k ETH ($133M) actually becoming liquid.
However, despite this, the sell-side volume is still within the average weekly exchange inflow volume. The report aims to assess the Ether staking landscape and the potential impact of the Shanghai upgrade.
To achieve this, depositors are segmented into different cohorts based on factors such as depositor age, depositor size, depositor profitability, and organization.
These segmentations consider both private stakers and institutional/staking provider depositors, with liquid staking providers such as Lido currently holding a market share of over 30% of the entire network stake.
The report also analyzes the withdrawal dynamics after Shanghai, with partial withdrawals automatically withdrawing each validator’s cumulative staking rewards, and full withdrawals involving shutting down the validator entirely and retrieving the entire stake balance.
The expected duration of the automatic withdrawal process is a maximum of 2 days, based on the actual number of validators that are eligible to be skimmed right after the Shanghai update.
After the Shanghai upgrade, an amount of 1.137M Ether will be automatically withdrawn from the Beacon Chain and transferred as an automatic balance update to the depositor’s Ethereum mainnet address.
The chart below shows the minimum and maximum amount of reward payouts, including the maximum daily amount of ETH being unlocked in each case.
To estimate how much of the accumulated rewards will actually be sold, the depositor segmentation above comes in handy. Lido holds a significant share in the accumulated rewards and has vowed to mainly re-stake its rewards, which would result in a big part of the staking rewards being sold.
Potential supply pressure and price impact
The Glassnode report segments depositors based on anticipated needs and motivations for staking or unstaking ETH. This segmentation takes into account factors such as depositor age, depositor size, depositor profitability, and organization.
By doing so, the report estimates that only 100k Ether ($190M) of the total accumulated rewards will be withdrawn and sold, and only 70k Ether ($133M) will actually become liquid.
The report also analyzes the withdrawal dynamics after Shanghai, with partial withdrawals automatically withdrawing each validator’s cumulative staking rewards, and full withdrawals involving shutting down the validator entirely and retrieving the entire stake balance.
The report also analyzes the potential supply pressure and price impact of the Shanghai upgrade. Glassnode estimates that during the first week after the upgrade, 1.54M ETH ($2.93B) could become liquid, with 312k ETH($592M) becoming liquid over the first week, and 170k ETH ($323M) being sold.
However, this is still within the range of typical weekly exchange inflow volumes, indicating that the price impact may be limited. Even in the extreme case of a sudden rise in voluntary exits 27 hours prior to the Shanghai, there would still only be a limited increase in stake withdrawals.
