Original title: "Ethereum Shanghai Upgrade Will Enable Withdrawal Function, Analysis of ETH Selling Pressure under Different Situations"
Compilation of the original text: The Way of DeFi
Compilation of the original text: The Way of DeFi
After the Shanghai upgrade is completed, a large amount of ETH will be withdrawn, the amount may be between 3 million and 6 million.
How many of them will be sold?
I broke down stakers into a few broad categories to understand their ability and willingness to sell ETH and analyzed different scenarios.
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Chart: Estimated Selling Pressure from Partial and Full Draws
Shanghai's upgraded and open ETH extraction function will be the biggest resistance to its price in the near future, and the article will estimate their potential selling pressure.
Reminder: Extraction can be partial or complete.
Partial (PW: Partial Withdrawal)
Only withdraw the rewarded portion
Process active validators with a balance greater than 32 ETH
All (FW: Full Withdrawal)
Validator balances are all withdrawn
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How much ETH will be withdrawn by then?
Suppose the Shanghai upgrade happened today:
1, 021, 602 ETH：PW（512,000 staking rewards for active validators)
37, 758 ETH：FW（1,All balances of the 105 exiting validators)
Total: 1,059,360 ETH
This takes about 4.5 days to process.
But the Shanghai upgrade will most likely be activated by the end of March.
If current activity trends continue, it is expected that by the end of March there will be:
540,000 validators issued an additional 97,000 ETH in staking rewards
In the case of PW alone there is room for 1,119,000 ETH.
So what about FW? There will most likely be a lot of FW in the beginning.
Even if only 10% of all validators decide to quit, it will take 31 days to complete the exit queue (8 exits/epoch).
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Figure: Waiting time for ETH validators to exit withdrawals, assuming the number of validators is 540,000
Let's sum it up:
1, 119, 000 ETH：PW（540,000 staking rewards for active validators)
38,000 ETH: FW, for validators who have exited
1, 728,000 ETH: FW, if 10% of validators quit
Total: 2,885,000 ETH
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Figure: The situation of PW and FW after the Shanghai upgrade, assuming that the number of verifiers is 540,000 and the exit rate is 10%
The withdrawal schedule for the first month will not change if more validators decide to withdraw.
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How much ETH will be sold?
My estimates range from 436,000 ETH to 2,917,000 ETH.
This range is wide and represents extremes: moderate selling and aggressive selling.
If you're interested in how I came up with this number, read on.
First, let’s talk about the types of stakers. It is very useful to analyze the ETH in the pledge by the pledger type.
Among them are:
33.3% from liquidity staking
28.2% come from centralized trading platforms
25.0% from unidentified people + whales + others
13.5% from the staking pool
Each type handles PW and FW differently.
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Let's look at PW first
Assumptions:
All validators update withdrawal credentials as soon as possible - PW handles this automatically, but only when credentials are updated to the new format
Staker classes define ability/willingness to sell ETH (more on that below)
Liquid Staking: Liquid Staking ETH (lsETH) has been designed with staking rewards in mind. This means that PW will not be distributed to lsETH holders. They will select liquid staking providers that are likely to use them to set up new validators. There is no selling pressure here.
Staking pools: From an economic standpoint, there is absolutely no reason for staking pools to give stakers immediate access to their PW. Instead, setting up new validators is more profitable. Some staking pools may also require an "unbonding" period before stakers can receive rewards. I think the selling pressure here will be subdued.
Centralized trading platform: Some CEXs use IsETH, and the script should be like liquidity staking, that is, there is no selling pressure. Other CEXs are more like staking pools - there is no reason for stakers to get PW immediately, which means selling pressure will be suppressed.
Summarize:
Summarize:
I made predictions for the percentage of ETH sold in the PW scenario in three scenarios: Moderate, Average, and Aggressive.
Mild: 8% = > 92,000 ETH
Average: 16% = > 183,000 ETH
Aggressive: 30% = > 333,000 ETH
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Look at FW again
Assumptions:
Validators exit as quickly as possible - processes maximum number of exits per day (1,800)
All FW processed per day (1,800)
The number of active validators remains the same - new validators are being created
Staker categories and profitability define willingness to sell
Forecasting selling pressure from FW is challenging.
There are two unknown variables:
% of validators who want to quit
% of validators who want to sell
To assess average daily selling pressure, both factors must be considered.
There are 3 reasons for exiting:
sell coins
Hodl/DeFi mining
Re-entry (changing stake settings/providers, etc.)
It is difficult to predict how many validators will exit.
I would consider three cases:
Mild: 10%
Average: 20%
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Figure: FW sales forecast
For example:
For example:
10% of validators want to sell
If 10% withdraw, 100% of daily FW is sold
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Figure: Average daily selling pressure depends on the percentage of validators who quit, assuming a total validator of 540,000, of which 10% want to sell
I split the validator set into parts along two dimensions:
Pledger Type
profit group
reason:
The categories are different, for example, solo stakers are less likely to sell than CEX stakers.
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Summarize:
Summarize:
Using sell pressure assumptions for each category, I calculated the percentage of validators who want to sell ETH for 3 scenarios.
Total selling pressure from FW:
Mild: 2% = > 345,000 ETH
Average: 7% = > 1,206,000 ETH
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total selling pressure
By summing the selling pressure from PW and FW, we get the total selling pressure in 3 cases:
Mild: 436,000 ETH => 14,000 ETH/day over 1 month
Average: 1,390,000 ETH => 23,000 ETH/day over 2 months
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Figure: Summary of PW and FW Selling Pressure
14,000 ETH per day in a mild case is equivalent to the daily issuance of new coins (~13,000 ETH) to miners before the transition to PoS. Probably nothing will happen.
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Finally I want to say
From a long-term perspective, I am very bullish on ETH.
Still, it's hard to ignore the downside of opening withdrawals.
The mere anticipation of a sell-off can lead to a sell-off.
But if the market remains bullish, it could be easily absorbed by new buyers.
Aside: For simplicity, my calculations assume flat daily inflows to PW. In reality, this will be the curve that peaks in a few days. However, the total PW doesn't change, so it shouldn't have much impact. Detailed explanation of PW distribution: https://dataalways.substack.com/p/partial-withdrawals-after-the-shanghai
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