Ether may now be unstaked: Was that it? Ether may now be unstaked: Was that it? Ether may now be unstaked: Was that it?

Ether may now be unstaked: Was that it?

Mads Eberhardt

Cryptocurrency Analyst

Summary:  Roughly one and a half years after Ethereum holders started staking Ether, they may now unstake to make their Ether accessible following the Shanghai hard fork. The day has been feared by the market, as it would allow 19.2mn Ether to be unlocked in the foreseeable future. However, at first sight, it appears that fewer than expected want to unstake, leading Ethereum to a nearly 5% gain in 24 hours, so Ethereum trades above $2,000 for the first time since August 2022.


In September 2022, Ethereum transitioned from proof-of-work to proof-of-stake in an event known as the merge. The proof-of-stake framework allows Ether holders to verify transactions in the role of being a staker. Nearly two years before the merge, on the 1st of December 2020, the staking contract launched, allowing holders to stake Ether by that time. Until this day, staking has been a one-way street, so stakers have not been able to withdraw from staking to make their Ether accessible again, not even following the merge. From a total supply of nearly 120.5mn, almost 19.2mn Ether is in the staking contract, of which some have been staked since the 1st of December 2020, effectively locked for about 2.5 years.

Shanghai makes stakers non-stakers

However, the one-way street turned into a two-way street this evening, as the highly anticipated Ethereum hard fork called Shanghai – or Shapella – was successfully implemented. Among other minor advances, the most noted addition was the technological possibility to unstake Ether, slowly opening the floodgates to the 19.2mn staked Ether worth over $38bn.

The 19.2mn Ether is not instantly withdrawable from staking, though. About 1,800 validators of 32 Ether each may exit staking daily. This totals 57,600 Ether of the nearly 18.2mn originally staked Ether. To ensure a maximum of 1,800 validators exit per day, there is a queue called the exit queue in which validators wait on a first-come, first-served basis. When a validator successfully exits this queue, it has to wait at least a couple of days in another queue known as the withdrawal queue before the Ether is accessible. On the contrary, the slightly more than 1mn total staking reward of the past nearly 2.5 years can be completely withdrawn in the coming few days.

Although the Ether is only slowly withdrawable from staking, the day of the Shanghai hard fork has long been feared by the market worrying that many stakers would liquidate Ether as soon as they were able to due to the multiple-year lockup.

Few are unstaking

In January, we published our view on this matter. We argued that the Ethereum market would mostly be negatively driven by the sentiment leading up to the hard fork, rather than by heavy selling pressure from unstaked Ether following the hard fork, considering that most stakers are long-term holders fully aware of the multiple-year lockup, whereas stakers willing to sell would likely already have hedged their portfolio by shorting futures. Likewise, the modest daily limit to withdraw staked Ether causes potential selling pressure to be evenly distributed over a long period to better be aligned with buyers.

The past slightly more than 12 hours since the Shanghai hard fork has so far confirmed this view. Although the exit queue has been open prior to the hard fork, it currently only has 18,000 validators and the withdrawal queue has 5,100 validators compared to about 560,000 active validators. The first of these validators is expected to be fully accessible sometime tomorrow, so it is too early to conclude whether these are about to hit the market. It is, though, clear that not every unstaked Ether will hit the market, as some validators have more or less been forced to unstake. This includes the crypto exchange Kraken. The latter is undisputed the largest entity to unstake, which is largely done due to a settlement with the Securities and Exchange Commission (SEC) in the US earlier this year, forcing the exchange to end staking services to US clients. Nonetheless, it appears that the market expected a much greater unstaking queue, as Ethereum is up by nearly 5% in the last 24 hours while being up by 3% relative to Bitcoin. Ethereum crossed $2,000 for the first time since August 2022 earlier today.
Source: Saxo Group

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.