Most blockchain upgrades have an impact on price action. The Shanghai Ethereum upgrade will be no different. The supply of ether on the exchange has started to fall as investors choose to move their assets into custody.
Ethereum’s previous upgrade created good volatility in the market, which traders did. The price of ETH rose from around $1,000 in July 2022 to over $2,000 in August and reached around $1,800 just around the time of the Merger. With the supply of Ether on the exchange so fast, traders may see another price spike leading to Shanghai’s upgrade.
However, short-term traders may want to note the fall in the price of Ether since the Merger is pushed in 2022. This upgrade may not make much of a difference. Another factor to keep in mind is that Ethereum users who have not been able to withdraw their purchased Ether for more than two years will have access to do so after the Shanghai upgrade.
With more than 16.4 million ETH staked, if some of it reaches the market, it could increase the supply of Ether and reduce the price after the Shanghai upgrade is complete. This relationship between supply and demand is a fundamental principle of economics and is a key factor in determining the price of any asset, including cryptocurrencies, stocks, bonds and commodities.
It is also worth noting that, although there is a downside risk for price action after the Shanghai update due to staking withdrawals, ETH withdrawals will only be available in small pieces. For example, traders who want to withdraw Ether after upgrading can only do so gradually over time.
This can reduce the downside risk for the price of Ether. But the fear of increased supply is what could affect market sentiment in the short term.