Ethereum Price Prediction: What To Expect From ETH As The Shanghai Upgrade Nears
Ethereum price is at an inflection point as it trades above $1,700 with no clear directional bias. Apart from the market FUD emanating from increasing regulatory crackdowns and a global banking crisis, investors are treading cautiously as they want to see the direction Ether will take once the Shanghai upgrade goes live in the next two weeks.
The Ethereum Shanghai Upgrade To Go Live On April 12
The long-awaited Ethereum Shanghai upgrade, which will enable the withdrawal of staked Ether, is slated for April 12, 2023. The Ethereum devs team announced the launch date through a March 28 tweet saying, “Shapella is scheduled on mainnet for epoch 194048, scheduled for 22:27:35 UTC on Apr. 12, 2023.”
According to data from analytics firm Dune, over 16.3 million ETH tokens are staked on the Ethereum network but cannot be withdrawn. The Shanghai upgrade, which has been named Shapella, is designed to give users who staked their ETH on the Ethereum network as early as December 2020 the freedom to withdraw their locked tokens.
It is believed that enabling withdrawals will reduce the risk associated with holding the staked version of Ethereum, including Frax’s froTH and Lido’s stETH, because they will be redeemable.
How Will The Ethereum Price Behave Post-Shanghai
There are mixed expectations on what may happen to the ETH price once the Shapella mainnet is launched. On the one hand, it is expected that some investors may want to cash out on their staking positions for liquid funds. Such a move would see them exit the Beacon Chain. Even if node operators withdraw and sell their ETH, they would want to maintain their staking positions for more yields.
However, it is important to note that ETH stakers will not be able to withdraw their staked tokens all at once. A withdrawal process has been put in place that first allows holders to directly withdraw their staking rewards. This would represent $1.03 million ETH, worth about $1.8 billion at current rates. Given that Ethereum’s daily volume ranges between US $8-10 billion, chances of negligible selling pressure are high.
In addition, the amount of ETH staked per validator cannot be withdrawn directly given that a limit of 20,400 ETH ($85M at current rates) is required per day. This is a negligible amount as well when compared to Ether’s daily trading volume.
Therefore, it is safe to say that the ETH price may not be too negatively impacted by the upgrade due to the relatively low selling pressure.
On the other hand, Ethereum holders could be motivated by the reduced risks to stake their ETH on the network and earn passive income. Note that staking rewards are inversely proportional to the number of validators. Therefore, if the number of node operators reduces, presumably because of stakers withdrawing their ETH, rewards will surge, attracting more validators. Given that ETH is now deflationary, however, we expect more buying pressure compared to selling pressure.
If Ether owners “HODL” their tokens and buy more, the equilibrium Ether price could rise because the quantity supplied will be reduced.
Ethereum Price Consolidating Before The Upgrade
After rising above the $1,700 psychological level on March 17, the Ethereum price has been consolidating in a sideways price action. This points to decreasing volatility as both buyers and sellers fight for control.
The consolidation and decreasing volatility are illustrated by the choppy price action as well as the constriction of the Bollinger Bands. The more the bands squeeze toward each other, the more the volatility decreases, suggesting that a breakout may happen in either direction.
The horizontal price movement is also supported by the flattening of the moving averages and the leveling of the Relative Strength Index (RSI) close to the midline. This implies that the buying and selling pressures are balancing out.
ETH/USD Daily Chart
Should the Ethereum price favor the buyers, it would rise from the current level to produce a daily candlestick close above the upper band of the Bollinger at $1,860, confirming a bullish breakout. Such a move would see the buyers collect the liquidity above the said level, bolstering ETH toward the $2,030 range high. This would represent a 13% ascent from the current levels.
Should ETH move in favor of the downside, it would produce a daily candlestick close below the middle band of the Bollinger at $1,740 to seek solace from the $1,700 psychological level. Ethereum’s downside could be capped here in the short term, given that this level has provided support for the token for the last 14 days.
Losing the support at $1,700 could initiate massive sell orders, with the first line of defense emerging from the 50-day Simple Moving Average (SMA) at $1,653. Additional support zones could be found at the $1,600 psychological level, the 100-day SMA at $1,540, and the 200-day SMA at $1,436, before reaching the March 10 swing low at $1,370. This would represent a 23% drop from the current price.
