On April 12, 2023, Ethereum successfully executed the planned Shanghai update also known as Shapella. The upgrade allows validators to unstake their staked ETH and withdraw their rewards, as well as staked ether if chosen. Now that another level of uncertainty has waned for the biggest smart contract blockchain, this new feature could attract more investors to stake their ether. The Shanghai update comes about seven months after the Merge, which took place in September 2022, changing Ethereum from a Proof-of-work blockchain to a Proof-of-stake one.
While validators can now withdraw their staking rewards, they’ll have to adhere to a queuing system. As of this writing, there are 29,036 validators and 987,604 ETH waiting for a full exit based on Nansen data. This means the majority of validators is not unstaking as most people feared, since there are over 570,000 validators in total. Some experts predicted selling pressure would follow after the upgrade, resulting in a downward price action. However, ETH hit $2,000 after the Shapella upgrade and has remained above this mark as of this writing. Still, to watch for any signs of selling pressure, the withdrawal queue should be monitored over the coming weeks.
Validators that fully exit the chain will stop contributing to the network unless they decide to re-stake their ether. According to the blockchain analytics Twitter account Lookonchain, a few of the top withdrawing addresses have re-staked ETH after withdrawing.
Among the top withdrawing entities is the crypto exchange Kraken. This is due to the fact that is no longer offering staking as a service, given the regulatory action that was taken against the exchange. The exchange was targeted by the SEC in February this year, forcing it to shut down its staking service. Kraken also paid a $30 million fine. This regulatory action only appears to have affected staking on Kraken. Ether staking in general remains unaffected, with investors continuing to deposit ETH on other platforms. At the time of writing, the 24-hour net deposits were 96,352 ETH, indicating that more people are currently staking their ETH than leaving the network.