first level title

ETH is experiencing a second wave of withdrawals

It has been more than a week since Ethereum completed the Shanghai upgrade. Statistics show that since the first wave of withdrawals after the upgrade, the number of ETH deposits exceeded the number of withdrawals on April 18, but a new wave soon ushered in wave of withdrawals. As of April 20, 2023, there are a total of 758,842 ETH waiting to be withdrawn, accounting for 4.08% of the ETH currently still locked.

In the last week, the number of withdrawals continued to climb, and currently, there are still 758,000 ETHs queuing for withdrawals. According to Nansen.AI statistics, since April 18, the number of ETH deposits has begun to overtake the number of withdrawals. Recently, most ETH has been deposited through liquid pledge agreements such as Lido, Rocketpool, and Frax. Starting from the 19th, another wave of withdrawals may be due to the opening of the withdrawal service of Binance and the decline of the market.

first level title

Withdrawal waiting time

The Shanghai upgrade enables Ethereum stakers to withdraw their entire balances from validators. When a full validator withdraws its 32 ETH, its validator is deactivated, while a partial withdrawal allows stakers to simply withdraw rewards earned in addition to their 32 ETH. When all 32 ETH in a validator are withdrawn, it will cause the validator to withdraw. Therefore, the Ethereum team has set a strict time limit for this to ensure that multiple validators will not completely withdraw in a short period of time to avoid posing a threat to the network security of Ethereum.

In order to withdraw staked ETH, validators are required to change their withdrawal token prefix from 0x 00 to 0x 01 . When the Shanghai upgrade rolled out, only about 40% of validators had their credentials set to 0x01. Currently, this figure has increased to 85.8%, and it is expected to gradually approach 100%.

Partial withdrawal means that the validator only withdraws its rewards for staking, while keeping its principal ETH to keep the validator running. Therefore, the waiting time for partial withdrawals is shorter, only about 4.27 days, and with withdrawal credentials set up, initiating partial withdrawals will be automatically sent to the validator address.

first level title

LSD’s Rise in the DeFi Sector

Since the upgrade in Shanghai, the market share of encryption service providers has begun to shift, and DeFi is the main beneficiary. In particular, Liquid Staking Protocols (LSDs) such as Lido, Rocket Pool, and Frax are in great demand, as these LSDs allow users to participate in a range of DeFi trading and lending applications using their Ethereum-based derivatives.

On April 15th, a total of 8,030,870 ETH was locked in LSD. By April 20, that number had increased to 8,185,856 ETH worth $16 billion. On the LSD protocol, the TVL in Lido is $11.84 billion, up 2.21% over the past seven days.

From the TVL ranking of various categories of DeFi protocols, it can be seen that the TVL of 802 DEX protocols is 18.62 billion US dollars, ranking first, while the TVL of 82 LSD protocols is 17.99 billion US dollars, which is already very close to the TVL of DEX.

first level title

CEX's ETH withdrawals are higher

On the other hand, the CEX platform has seen a trend of ETH withdrawals and outflows. Judging from the distribution of the number of withdrawn ETH, Kraken, which was previously fined by the SEC for non-compliant pledge services, has withdrawn 417,000 ETH, accounting for 31.5%. Binance has withdrawn 91,000 ETH, accounting for 6.72%. Huobi has withdrawn about 51,000 ETH, accounting for 3.77%.

According to the blockchain analysis website Lookonchain, as of April 17, among the top 20 addresses in the number of ETH deposits after the upgrade in Shanghai, 13 addresses were re-pledged after withdrawal, with a total of 34,198 ETH pledged. In addition, two large households re-pledged the withdrawn 50,000 ETH through the LSD protocol Agility. It can be seen that not all ETH withdrawals mean being sold, and they may also be adjusting their pledge methods.

first level title

Sources and Factors of Subsequent Selling Pressure

Also, it’s important to note that Lido, the largest decentralized LSD protocol, will allow withdrawals of staked ETH in May. Therefore, we may continue to see some ETH selling pressure in the next few weeks.

According to Token.unlocks data, as of April 20, the APR of ETH staking was 4.62%, which is slightly lower than before (it may also be slightly less attractive to stakers).

From the price distribution chart of ETH staking, the price area with the highest proportion of staking participation is 1501-2000 US dollars, followed by 2501-3000 US dollars and 1001-1500 US dollars.

first level title

summary

To sum up, ETH can be said to have survived the Shanghai upgrade relatively smoothly, but in the short term it will continue to experience the test of periodic selling pressure, and it will also be affected by the trend of the broader market. The withdrawal and pledge itself after the upgrade is also a dynamic game process, so the price of ETH may still experience repeated fluctuations. However, from a mid- to long-term perspective, due to the flexibility of staking brought about by the upgrade (withdrawal waiting time is less than 20 days), after the phased withdrawal sell-off ends, the waiting time for queuing for withdrawal will be reduced, and staking participation is expected to continue to rise.

Ebunker official website: https://www.ebunker.io