shapella

Bitcoin’s dominance knocked by ETH’s post-Shapella rally

Bitcoin’s percentage of the total cryptocurrency market retreated by nearly 1% on April 14, while Ether gained just over 1.1%.

Ether (ETH) prices have topped the psychological $2,000 level following the Shapella upgrade this week and the result is a decline in Bitcoin (BTC) market dominance.

According to data from the analysis site btctools.io, Ether’s market share had climbed to 19.8%, an over 1.1% boost, in the last 24 hours at the time of writing on April 14, while Bitcoin’s dominance had slid by just under 1%. Since the beginning of the year, ETH dominance has increased by 7.6%.

Bitcoin’s market dominance has fallen to 47.7% as Ethereum’s market share increased. The post-Shapella ETH rally has knocked BTC off an almost two-year high in terms of market share.

BTC’s market share tapped 48.8% on April 12 following its rally to $30,000, the highest it’s been since July 2021, when it came just shy of 50%. Additionally, BTC has not been over 50% dominant since April 2021.

Bitcoin’s dominance remains up 13.6% since the beginning of the year, according to TradingView data.

Chart plotting Bitcoin’s dominance since late 2022. Source: TradingView

The market share rise in both BTC and ETH has been at the expense of altcoins, most of which have been lackluster during the recent rally of the two top coins.

Bitcoin and Ether combined represent around 68% of the total crypto market. Roughly 10% of the market are stablecoins, meaning the other 10,800 or so tokens, as listed on the price analytics platform CoinGecko, have a combined share of just 22%.

The market cap share of the top coins over one month shows a slight increase for ETH and a decrease for BTC. Source: CoinMarketCap

Market dominance is calculated by looking at an asset’s market capitalization compared with the total crypto market cap, which is currently at an eleven-month high of $1.33 trillion.

Related: Bitcoin dominance nears 50% as research hails ‘bullish’ narrative flip

Ether (ETH) has surged 10.25% over the past 24 hours. As a result, the asset tapped an eleven-month high of $2,122 during the April 14 morning Asian trading session, according to Cointelegraph data.

Ether momentum has been driven by a successful Shapella upgrade on April 12, which released staked ETH on the Beacon Chain.

BTC has managed a 2% gain on the day, reaching an intraday high of $30,862 during the April 14 morning Asian trading session.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Ethereum’s Shapella hard fork executed on mainnet

After months of delays, Ethereum validators can finally withdraw their staked Ether and rewards from the Ethereum mainnet.

The Shapella hard fork has officially been executed on the Ethereum mainnet — meaning that Ethereum validators can finally withdraw their staked Ether (ETH) from the Beacon Chain.

The long-awaited upgrade took effect at 10:27 pm UTC on April 12 at epoch number 194,048.

Within the first hour of the hard fork, a total of 12,859 Ether were unlocked in 4,333 withdrawals, according to Ethereum block explorer beaconchai.in.

The number of withdrawals, Ether processed and the number of withdrawal validators. Source: beaconcha.in

Currently, around 44% of validators, or 248,043 of the total active 559,549, can request a partial or full withdrawal.

The majority of withdrawals at this time range between 2.8 to 3.2 ETH, which suggests that it’s mostly staking rewards that are being withdrawn at this time.

The withdrawals come as only 3,996 validators signed up to the exit queue moments before the Shapella hard fork took effect, according to data from Rated Network Explorer.

Of the total amount of withdrawable Ether, crypto exchange Huobi holds the largest share at 30%, followed by the decentralized autonomous organization PieDAO at 17.7%, according to data from blockchain analytics firm Nansen.

Total number of withdrawable Ether by entity. Source: Nansen

A total of 284,622 Ether is awaiting a full withdrawal from 7,948 validators, Nansen data shows.

The price of Ether, currently $1,920, has barely moved within the first hour of the hard fork something which was predicted in an April 11 report from blockchain intelligence platform Glassnode.

The hard fork can theoretically unlock 18.1 million Ether on the Beacon Chain currently equating to over $34.8 billion, however, several mechanisms are in place to prevent a flood of ETH from hitting the market, according to the Ethereum Foundation.

Related: Less than 1% of staked ETH estimated to sell after Shanghai upgrade: Glassnode

In its report, Glassnode estimated that less than 1% of that total would be released over the first week and the 12,859 Ether unlocked within the first hour only represents 0.07% of the total Ether staked in the Beacon Chain.

Through Ethereum Investment Proposal EIP-4895, staked Ether was pushed from the Beacon Chain to the Ethereum Virtual Machine (EVM) otherwise known as the execution layer, making withdrawals possible.

It is the most significant upgrade since the Merge on Sept. 15 and it moves Ethereum one step closer towards a fully functional proof-of-stake system.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Update (April 12, 11:52 pm UTC): This article has been updated to include Ethereum validator withdrawal figures immediately following the Shapella hard fork.

Update (April 13, 12:20 am UTC): This article has been updated with further information, metrics and background information.

Ethereum price metrics hint that ETH might not sell-off after the Shapella hard fork

ETH traders are exercising caution ahead of the April 12 Shapella hard fork, but the signal to watch is staking unlock requests.

Ether (ETH) price has increased by 58% year to date, but it has far underperformed the market leader Bitcoin (BTC). In fact, the ETH/BTC price ratio has dropped to 0.063, its lowest level in nine months. 

Analysts believe that the majority of the movement can be attributed to the Ethereum network’s upcoming Shapella hard fork, which is scheduled for April 12 at 10:27 p.m. UTC.

Ether / Bitcoin price ratio at Binance. Source: TradingView

The Ethereum network upgrade will allow stakers to unlock their Ether rewards or stop staking entirely. By April 11, over 170,000 ETH withdrawals were requested, according to the analytics firm Glassnode. However, the total staked on the Beacon Chain exceeds 18.1 million ETH, which has traders fearful until more information on ETH’s potential selling pressure becomes available.

Is the price impact of the Shapella fork already priced in?

The staking unlock was widely known and expected, so traders could have anticipated the movement. Some analysts have gone so far as to call the hard fork a “buy the news” event.

Using a meme, trader CanteringClark is likely expressing dissatisfaction with the theory, but to invalidate the hypothesis, one must investigate potential reasons for ETH’s underperformance other than the much anticipated hard fork.

For starters, the Ethereum network’s average transaction fee has been above $5 for the past five weeks, and the Shapella fork does not address the issue, despite minor improvements. This alone lowers the chances of a bullish breakout following the upgrade, as most decentralized applications (DApps) and projects will continue to prefer second-layer and competing networks.

Furthermore, volume at Ethereum-based decentralized exchanges (DEX) has fallen by 84% since a weekly peak of $38.2 billion on March 5. The most recent data for the week ending April 2 was $6.4 billion, according to DefiLlama. In the same period, competing blockchains saw 60% lower volumes on average, a sign that Ethereum lost market share.

According to Paul Brody, EY’s global blockchain leader, one reason for Ether’s price underperformance relative to Bitcoin could be “the battle to keep Ethereum sufficiently and properly decentralized.” Brody cites exchanges as highly centralized custodial validators, as well as some semi-centralized players and staking pool operations that invest funds from tens of thousands of individual crypto wallets.

Ether derivatives display balanced bets between bulls and bears

Let’s examine Ether derivatives metrics to determine the current market position of professional traders. For example, the open interest in Ether options for the weekly expiry on April 14 is $510 million, with neutral-to-bullish call instruments outnumbering protective put options by 36%.

Those ETH options bulls could come up empty-handed because 60% of their bets were placed at $2,000 or higher. As a result, if Ether’s price remains between $1,800 and $1,900 on April 14 at 8:00 am UTC, the outcome is balanced between call and put options. Furthermore, an expiry price between $1,900 and $2,000 represents a mere $100 million advantage for bulls, which is unlikely to justify the cost of a price pump.

Futures markets should also be examined to determine whether the Shapella hard fork has caused investors to become more risk-averse. Ether quarterly futures are popular among whales and arbitrage desks, and they typically trade at a slight premium to spot markets, indicating that sellers are requesting more money to postpone settlement.

As a result, futures contracts in healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Ether 3-month futures annualized premium. Source: Laevitas

The premium on Ether futures is currently 2%, down from 4% the previous week. Despite being below the 5% neutral threshold, it shows no excessive short demand.

Related: Validator service to use API for ETH staking process

Traders should monitor staking unlock requests

Based on Ether derivatives, there is no reason to believe professional traders expect a significant price correction as a result of the staking unlock. Nonetheless, given the high transaction fees and declining DEX activity, the chances of a “buy the news” event are slim.

Professional traders would have used derivatives instruments to bet against Ether’s price because the event was widely publicized, which hasn’t happened given the ETH futures’ premium. There are no obvious reasons for a rally, but derivatives traders do not anticipate any panic selling. So, unless the number of staking unlock requests significantly increases, Ether should remain near $1,900 for the foreseeable future.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Ethereum staking deposits dip due to regulatory pressure and Shapella upgrade

The amount of ETH being staked monthly has recently dipped according to the on-chain analytics platform Glassnode.

Ethereum staking deposits have declined slightly in recent weeks due to increased regulatory pressure and the Shapella upgrade slated for April 12.

On April 9, on-chain analytics provider Glassnode reported on the current state of the Ethereum staking ecosystem.

The data revealed that deposit activities are currently low, “due to regulatory pressure and the Shanghai upgrade.”

Financial regulators in the United States have been coming down hard on crypto this year. The Securities and Exchange Commission is adamant that Ether (ETH) is a security and has cracked down on staking despite there being no official legislation from Congress classifying ETH as such.

The Ethereum network will undergo a long-awaited upgrade on April 12. The Shapella hard fork, also known as the Shanghai hard fork, will enable the phased release of ETH staked on the Beacon Chain.

These two factors have caused the dip in Ethereum staking deposits, according to Glassnode.

The firm also noted that major centralized exchanges such as Coinbase, Binance and Kraken have lost a lot of market share to the liquid staking platform Lido.

“As the dust settled between the three giants, it was Lido who emerged victorious, continuing to dominate deposit inflows as of present,” it noted.

Lido currently accounts for almost a third of the total amount of ETH staked. This equates to around $11 billion from the 5.9 million ETH on the platform.

Centralized exchanges such as Coinbase take a hefty 25% commission from the staking rewards, with Coinbase’s commissions being even higher for other assets such as Cardano (ADA) and Solana (SOL).

Lido takes a 10% commission and offers the potential of earning additional yields on DeFi platforms through its staking token Lido Staked ETH (stETH). This explains the shift over time as savvy stakers switched to more profitable platforms.

Analysts have predicted that liquid staking platforms such as Lido will get a boost when ETH is released from the Beacon Chain after the Shapella upgrade.

Related: Analysts debate the ETH price outcomes of Ethereum’s upcoming Shapella upgrade

According to the Ethereum metrics tracking platform Ultrasound.Money, there are currently 18.1 million ETH staked in total currently valued at around $33.7 billion and representing 15% of the entire supply.

After the Shapella upgrade, this will be slowly released for withdrawal in the weeks and months that follow.

Magazine: Features ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Ethereum price reaches lowest level relative to Bitcoin in 5 months

Traders question whether the underperformance is due to the Shapella hard fork, while derivatives data indicates that ETH buyers lack conviction.

The previous six months should have been extremely beneficial to Ether’s (ETH) price, especially following the project’s most significant upgrade ever in September 2022. However, the reality was the opposite: Between Sept. 15, 2022 and March 15, 2023, Ether underperformed by 10% against Bitcoin (BTC).

ETH/BTC price ratio on Bitfinex, 2-day. Source: TradingView

The ETH/BTC price ratio of 0.068 had been holding since October 2022, a support that was broken on March 15. Whatever the reason for the underperformance, traders currently have little confidence in placing leverage bets, according to ETH futures and options data.

But first, one should consider why Ether’s price was expected to rise in the previous six months. On Sept.15, 2022, the Merge — a hard fork that switched the network to a proof-of-stake consensus mechanism — occurred. It enabled a much lower, even negative, coin issuing rate. But more importantly, the change paved the way for parallel processing that aimed to bring scalability and lower transaction costs to the Ethereum network.

The Shapella hard fork, expected to take effect on the mainnet in April, is the next step in the Ethereum network upgrade. The change will allow validators who previously deposited 32 ETH to enter the staking mechanism to withdraw in part or in full. While this development is generally positive because it gives validators more flexibility, the potential 1.76 million ETH unlock is a negative consequence.

However, there is a cap on the number of validators that can exit; therefore, the maximum daily unstake is 70,000 ETH. Moreover, after exiting the validation process, one may choose between Lido, Rocket Pool or a decentralized finance (DeFi) application for yield mechanisms. These coins will not necessarily be sold on the market.

Let’s look at Ether derivatives data to understand if the recent drop below the 0.068 ETH/BTC ratio has affected investors’ sentiment.

ETH futures recovered from a state of panic

In healthy markets, the annualized three-month futures premium should trade between 5% and 10% to cover associated costs and risks. However, when the contract trades at a discount (“backwardation”) relative to traditional spot markets, it indicates traders’ lack of confidence and is regarded as a bearish indicator.

Ether 2-month futures annualized premium. Source: Laevitas

Derivatives traders became uncomfortable holding leverage long (bull) positions as the Ether futures premium moved below zero on March 11, down from 3.5% just two days prior. More importantly, the current 2.5% premium remains modest and distant from the 5% neutral-to-bullish threshold.

Nonetheless, declining demand for leverage longs (bulls) does not necessarily imply an expectation of negative price action. As a result, traders should examine Ether’s options markets to understand how whales and market makers price the likelihood of future price movements.

Related: Lark Davis on fighting social media storms, and why he’s an ETH bull — Hall of Flame

ETH options confirm a lack of risk appetite

The 25% delta skew is a telling sign showing when market makers and arbitrage desks are overcharging for upside or downside protection. In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 8%. On the other hand, bullish markets tend to drive the skew metric below -8%, meaning the bearish put options are in less demand.

Ether 30-day options 25% delta skew: Source: Laevitas

On March 3, the delta skew crossed the bearish 8% threshold, indicating stress among professional traders. The fear levels peaked on March 10, when the price of Ether plummeted to $1,370, its lowest level in 56 days, although the price of ETH rebounded above $1,480 on March 12.

Surprisingly, on March 12, the 25% delta skew metric continued to rise, reaching its highest level of skepticism since November 2022. It happened just hours before Ether’s price rose 20% in 48 hours, which explains why ETH traders shorting futures contracts faced $507 million in liquidations.

The 3% delta skew metric currently signals a balanced demand for ETH call and put options. When combined with the neutral stance on the ETH futures premium, the derivatives market indicates that professional traders are hesitant to place either bullish or bearish bets. Unfortunately, ETH derivatives metrics do not favor traders expecting Ether to reclaim the 0.068 level against Bitcoin in the near term.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Breaking: Shanghai upgrade executed on testnet but not without issues

Ethereum validators are now one step away from being able to unstake their Ether from the Beacon Chain.

The Shapella hard fork has been executed on the Goerli testnet — the last test run before Ethereum validators will be able to withdraw their Ether (ETH) from the Beacon Chain.

There were, however, issues with the hard fork. Ethereum core developer Tim Beiko noted that while deposits were being processed, the process didn’t run as smoothly as it could have because several testnet validators didn’t upgrade their client software before the Goerli fork.

He blamed it on testnet validators having “less incentive” to make the upgrade given that the Goerli ETH “is worthless” but expects validators to make proper adjustments ahead of the fork on the Ethereum mainnet.

Ethereum researcher “terence.eth” explained that it took 15 epochs for Shapella to be forked onto the Goerli testnet because network participation was below the two-thirds threshold:

Through Ethereum Investment Proposal EIP-4895 staked ETH from the Beacon Chain will be “pushed” to the execution layer.

While the Shapella upgrade comprises five different EIPs, EIP-4895 has been by far the most anticipated as it moves Ethereum one step closer to a fully functional proof-of-stake system.

Shapella is expected to take effect on the Ethereum mainnet in early April following a few delays in preparing the Sepolia and Goerli testnets for the fork.

The hard fork will allow for partial and full withdrawals, and will theoretically unlock 17.6 million ETH when Shapella is forked, which equates to over $30 billion at current prices.

However several mechanisms are in place to prevent a flood of the ETH supply from hitting the market, according to the Ethereum Foundation.

The number of withdrawals allowed within a 24-hour period will only represent about 0.40% of the total staked ETH because only an approximate 2,200 withdrawals can be processed per day.

Related: Ethereum Shanghai upgrade could benefit liquid staking providers and cement ETH’s layer 1 dominance.

This is because, in most cases, a maximum of 10 validators can be assigned to an epoch and it takes approximately five or six minutes for an epoch to be processed.

If each of the 2,200 validators withdraws the full 32 ETH staked per day it would only account for about 70,000 ETH — a fraction of the 17.6 million staked.

The execution on Goerli was shared in a March 15 live stream by EthStaker on YouTube.


Ethereum testnet successfully forks in Shanghai upgrade rehearsal

As Ethereum’s Shanghai upgrade approaches next month, the network’s Sepolia testnet has successfully upgraded, simulating the scheduled hard fork.

The Ethereum blockchain’s Sepolia testnet has undergone a successful upgrade that simulates the upcoming Shanghai hard fork expected to take place on mainnet in March.

The “Shapella” upgrade, which combines the names of the upcoming Shanghai and Capella hard forks, was successfully implemented on the testnet on Feb. 28.

Shanghai is the fork’s name on the execution layer client side and Capella is the upgrade name on the consensus layer client side. One of the major changes enables validators to withdraw their staked Ether (stETH) from the Beacon Chain back to the execution layer.

Related: Lido Finance activates staking rate limit after more than 150,000 ETH staked

Validators needed to stake 32 Ether (ETH) to validate on the Ethereum blockchain. They will now be able to withdraw rewards in excess of 32 ETH and be permitted to keep validating while those who wish to fully withdraw can take all 32 ETH plus rewards and cease validating.

The next step before the Shanghai fork goes live on the mainnet will be to release the upgrade on the Ethereum Goerli testnet, which is expected to commence in March.