Unstake Ethereum: The fear of 17.2mn unlocked Ether Unstake Ethereum: The fear of 17.2mn unlocked Ether Unstake Ethereum: The fear of 17.2mn unlocked Ether

Unstake Ethereum: The fear of 17.2mn unlocked Ether

Mads Eberhardt

Cryptocurrency Analyst

Summary:  In late March or early April, Ethereum is expected to be subject to a hard fork opening the floodgates to 17.2mn staked Ether, some of which have been locked for over 2 years. Although the actual selling pressure might be negligible as most stakers are long-term holders, the fear of the wide-open floodgates may as a matter of fact be the main cause for poor short-term Ether sentiment.

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. To date, staking has been a one-way street, so stakers have not been able to stop staking and thus make their Ether accessible again, not even following the merge. From a total supply of 120.5mn, around 17.26mn Ether is at this time in the staking contract, of which some have been staked since the 1st of December 2020.

Ethereum leaves for Shanghai

In late March or early April, Ethereum is expected to face a hard fork known as Shanghai. The most notable feature of the hard fork is the opportunity to unstake Ether. However, the whole staking balance of 17.26mn Ether cannot be unstaked on the day of the hard fork. Only 43,200 Ether can be unstaked per day of the original 16.27mn staked Ether, whereas the total staking rewards of the past more than 2 years will instantly be withdrawable. The latter equals around 1mn Ether.

Thanks to the modest daily limit on the original 16.27mn Ether, this potential selling pressure is evenly distributed over a long time. This should allow buyers to match the selling pressure without much impact on the price. As stakers have been aware of this multiple-year lock-up of staked Ether, they are largely long-term holders, so few may unstake at all.

All eyes on the 1mn instantly withdrawable Ether

However, the 1mn instantly withdrawable Ether is more of a concern. This amounts to around 1% of free-floating Ether, in other words, not staked Ether. In a matter of minutes, the whole stack gets withdrawable, potentially causing holders to rush to exchanges to liquidate the Ether as soon as the floodgates are open, pushing down the price. This will particularly be true if they expect others to do so.

The sentiment leading up to the hard fork may have an even more negative impact. If the market anticipates heavy selling pressure at the time of the hard fork, holders simply hedge themselves by selling non-staked Ether or shorting Ether futures before the hard fork, while traders try to turn the hard fork into profit by likewise shorting Ethereum.

Due to the speculative nature of crypto assets, the market is often severely sentiment-driven, so a given sentiment about an event often initiates more selling pressure than the event itself. This was evident as late as November 2022, at which time FTX was hacked following its bankruptcy filing. The hacker traded every asset into Ether to own over 250,000 Ether. A week later, the hacker swapped a portion of the Ether into Bitcoin. Upon the anticipation that the hacker was about to liquidate the whole position of 250,000 Ether, holders sold Ether, causing the price to tumble by 10% in the span of two days, although the hacker altogether hardly sold 65,000 Ether.

As the Shanghai hard fork approaches, it appears that the market has already endorsed this sentiment of potential upcoming selling pressure. Ether has lost over 3% against Bitcoin year to date, yet it was up by as much as 8% two weeks ago. Traditionally, Ether has gained versus Bitcoin in times of broad risk-on sentiment, which has undoubtedly been the case so far this year. This sentiment about upcoming selling pressure is likely to be more powerful, as the Shanghai hard fork comes closer, particularly from the day on which Ethereum core developers set an official date for the hard fork, probably in late February or early March.

The outlook for Ethereum until Shanghai

Although this poor short-term sentiment for Ethereum likely amplifies over the coming months, it may have little or no impact on the Ether price, depending on the broader risk sentiment in other crypto assets and equities in the next couple of months. The hard fork may, though, increase the volatility in Ether if the market have a difficult time pricing what to expect.

Since we mostly expect the short-term Ethereum outlook to be sentiment-driven rather than driven by heavy selling pressure from unstaked Ether, the hard fork puts an end to this sentiment shortly after it has been implemented. If the hard fork is successful, it will be a risk-off event for Ethereum, as it is the last factor to come into effect for the merge to be fully finalized. In such a manner, it may contribute to short-term selling, but the aspect that holders can then stake and unstake as they see fit is positive long-term.
Source: Saxo Group

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

Contact Saxo

Select region


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.