Ethereum Shanghai Upgrade Expected to Incite More Price Volatility Than September Merge Upgrade
According to an analyst at Orbit Markets, the upcoming Ethereum Shanghai upgrade could lead to sustained volatility in the price of Ether.
Reports suggest that the upcoming Ethereum Shanghai upgrade may not merge Ether (ETH) price volatility in a way that doesn’t. According to institutional liquidity provider Orbit Markets, the Shanghai upgrade will facilitate the withdrawal of more than 16.5 million ETH across the blockchain. Furthermore, Orbit Markets also recommended buying ETH volatility swaps during the Shanghai upgrade. This will help it benefit from the anticipated price turbulence following the March mainnet upgrade.
According to analysts, the Shanghai upgrade could immediately affect the demand-supply balance of the Ether market. This anticipated development could ensure that crypto remains more volatile in the weeks following Shanghai than in the weeks leading up to the merger.
Yang Zhiming, co-founder of Orbit Markets, compared the Ethereum Shanghai upgrade to the September merge, which successfully transitioned the network from proof-of-work to proof-of-stake:
Although this time may be different. While the merge was a pure technical change with no direct economic impact, the Shanghai upgrade will alter the supply and demand for ETH in both the short term and long term, and is therefore capable of having a significant impact on ETH price.
Analyst Suggests Ethereum Shanghai’s Volatility May Prove Skeptics Wrong
Traders may not have seen much volatility with the Ethereum merge. As a result, Zhiming explained that it is forgivable if these traders also write off the Shanghai Upgrade price volatility. However, the co-founder of Orbit Markets and former head of derivatives at Deutsche Bank Asia Pacific explained:
“Some $25 billion worth of ETH will become available for withdrawal and sale. With staking yields expected to decrease after the upgrade, investors who previously staked may un-stake and be offered better yields.” may move to other performing assets. This will create heavy selling pressure on ETH price.”
The upcoming Shanghai upgrade comes months after the revolutionary merge that made the Ethereum network greener. Furthermore, the merge made the blockchain more easily accessible and fueled speculation that ether would become a deflationary currency. However, the major network overhaul failed to immediately affect the supply-demand dynamics of crypto as many had thought.
The price of ETH fell 10% to $1,472 on the day of the merge, but the volatility quickly dissipated as the price dropped. Furthermore, this narrow range between $1,300 and $1,400 remained in place for the next four weeks after the merge. In the four weeks following the famous mainnet upgrade, Ether’s 30-day volatility dropped from an annualized 85% to around 60%. Realized volatility is a metric that measures the variation in observed price volatility over a specific period.
shandong testnet
Last October, Ethereum officially laid the groundwork for the upcoming Shanghai upgrade via the Shandong testnet. At the time, Ethereum Foundation DevOps engineer Paritosh Jayanthi explained that the testnet was a dress rehearsal. According to Jubilee, Shandong allowed developers to “try potential EIPs to find problems”.
Ethereum remains the most widely used blockchain, with its parent ETH currency being the second largest crypto by market cap.
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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip crypto stories down to the basics so that anyone anywhere can understand without a lot of background knowledge. When he is not delving deep into crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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