Ether rallied past $2,000 for the first time since August after a widely anticipated software upgrade to the most commercially important blockchain went according to plan, and as worries of initial rapid outflows proved unfounded.
(Bloomberg) — Ether rallied past $2,000 for the first time since August after a widely anticipated software upgrade to the most commercially important blockchain went according to plan, and as worries of initial rapid outflows proved unfounded.
The so-called Shanghai update enables investors to queue up to withdraw Ether coins that they had pledged to help operate the Ethereum network in return for rewards, a process called staking. Ether jumped as much as 5.2% to $2,008 as just 0.3% of all 18.1 million tokens staked were withdrawn in the 12 hours following the upgrade, according to data from Nansen.
Ether is now up 67% this year and within a whisker of topping an August high, which would take it to levels not seen since late May. Its advance still trails the 83% surge in larger token Bitcoin, hinting at more upside should withdrawals remain muted.
“The amount of ETH entering the market from Shanghai withdrawals is much lower than what was previously expected,” said Grayscale Research analyst Matt Maximo. “The amount of new ETH being staked is also outpacing the withdrawals, which is creating added buy pressure to offset the withdrawn ETH.”
Tim Beiko, who helps to co-ordinate the development of Ethereum, posted on Twitter on Wednesday that the upgrade is now “official.”
The network revamp — also known as Shapella — is designed to let people exit an Ether staking investment and has stirred debate on whether the appeal of the largest token after Bitcoin will increase over time.
“Ethereum is updating and navigating with great skill — so far anyway — and cementing its position as the No. 2 crypto,” said Aaron Brown, a crypto investor who writes for Bloomberg Opinion. He added that the network is “moving to the future much faster than Bitcoin.”
About 1.2 million of Ether tokens — worth approximately $2.3 billion at current prices — are expected to be withdrawn over the next five days, according to researcher Coin Metrics. Some $36.7 billion of Ether is locked up for staking, data from Staking Rewards shows.
Crypto exchange Kraken dominated the initial exit queue, based on figures compiled by Rated Labs. Kraken is discontinuing staking products in the US as part of a settlement with the Securities and Exchange Commission. The regulator earlier this year alleged the firm’s staking service was an illegal sale of securities.
Investors were braced for crypto price swings around the upgrade but digital-asset markets were largely steady.
Smaller coins from applications that try to make it easier to harness Ether staking rewards, such as LDO and RPL, also advanced, according to CoinGecko data. LDO clinbed 6.1% and RPL was up 2.3%, the data showed.
The Ethereum blockchain in September last year transitioned to a proof-of-stake from a proof-of-work approach, a revamp called the Merge that slashed the network’s electricity consumption.
Proof-of-stake uses piles of Ether — placed in special so-called staking wallets — to help order transactions on the Ethereum network. Proof-of-work, the system used by Bitcoin, relies on power-hungry computers and consequently has been attacked for its environmental footprint.
–With assistance from Sidhartha Shukla.
(Updates with Ether price reaction from first paragraph.)
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