Ethereum’s Upcoming Update Raises Fears Of A Massive Sell-Off, But Is It Justified?

Following its release, Ethereum users were able to withdraw their ETH stakes from the “Beacon Chain,” the infrastructure that previously allowed the PoS migration. As a result, there is significant conjecture regarding the market’s possible influence.

As of this writing, Ethereum is rallying and appears to be on track to break through the $1,900 barrier and into the $2,000 range. However, the previous big update to the cryptocurrency was followed by a market sell-off and a drop towards important support zones.

According to a report by crypto research firm CryptoQuant, the Shapella update’s selling pressure “will be lower than expected.” According to the company, the majority of the ETH placed on the Beacon Chain, around 9.7 million ETH, was locked in late 2020 and 2021.

Ethereum has risen from below $100 to an all-time high north of $4,000. As a result, these millions of ETH were staked at a loss and are unlikely to be dumped as a result of the upgrade.

The majority of ETH holders on the Beacon Chain are big or institutional investors. In this regard, CryptoQuant investigated Lido and similar sites to evaluate retail investor sentiment.

Retail investors, like large investors, are holding staked ETH at a loss, as shown in the figure below. According to the study firm, a major amount of the deposits created by the Lido pool are presently submerged. We anticipate that the selling pressure will be lesser than predicted because the large staked ETH is presently at a loss.

Blofin, a crypto market intelligence organization, observed that the structure of “smart money” and the ETH options industry remained constant till now. As the upgrade approaches, the Implied Volatility of ETH is likely to rise.

However, until today, options speculators were not “aggressively” wagering on price fluctuations, implying that the Shapella upgrade may have been a non-event for ETH. According to Blofin, the huge increase in ETH prices did not fuel investors’ aggressive wagering on ETH’s performance predictions before and after the Shanghai upgrade. Although there is only approximately a week till the upgrade, the IVs of ETH options have not increased considerably, and the forward implied rate remains low.