Top five predictions to watch after Ethereum Shanghai upgrade

Metrics DAO analysts predict the long-term impact of the Ethereum Shanghai upgrade

Top five predictions to watch after Ethereum Shanghai upgrade
Art created for MetricsDAO by artghost 

Metrics Minds Weekly #1

On April 12th, Ethereum completed its Shanghai Upgrade, also known as Shapella. This upgrade heralds a new era of staking withdrawals and completes its transition to a full proof-of-stake network.

Before this upgrade, users were unable to withdraw their staked ether. Now they can. According to Vitalik Buterin, the co-founder of Ethereum blockchain, the “hardest and fastest parts of Ethereum protocol’s transition are basically over.” More than 18 million ETH - worth nearly US$39 billion - is now available to unlock.

MetricsDAO analysts zakkisyed, jackguy and Owentell looked closely at this historic milestone and predicted likely post-Shapella scenarios for the long term:

ETH price

While others predicted that this event could lead to major selling pressure on ETH, our community analysts said otherwise. According to them, while there might be a temporary dip in the price of ETH due to withdrawals by people who had staked their ETH, the price will rebound quickly as users restake ETH for yield and institutions enter the fray.

ETH price rose after the Shanghai upgrade. Source: CoinDesk

Staking increase

MetricsDAO community analysts predicted that staking activity will increase significantly, with institutions gaining more confidence in staking derivatives (LSD) services like Lido and RocketPool. Using the new ability to add and withdraw funds as needed, analysts expect that many people will rely on Ethereum staking for yield as they do on interest-bearing savings accounts. Another reason for the rise in staking is that the Shanghai upgrade reduces the duration risk, which refers to potential negative consequences a user might face due to the lock-up period of their staked assets, such as missing out on market opportunities or needing liquidity.

Daily staked Ethereum has grown just as MetricsDAO analysts predicted. Source: zakkisyed
Lido is a clear leader among LSDs. Source: Owentell

Liquid staking derivatives

LSDs have democratized access to Ethereum staking and will attract more demand from individual users looking for ways to earn a return on their ETH holdings.

More than half of users have staked less than 1 ETH through LSDs. Source: zakkisyed

Lower fees for a healthier ecosystem

Ethereum, known for its high fees as a layer 1 blockchain, is expected to continue the trend of reducing transaction fees for technical applications since the Merge. The reason is the implementation of Ethereum Improvement Proposals (EIP) such as EIP-3651, EIP-3860, and EIP-3855, according to Owentell.

The trend of lower gas fees has continued since the Merge. Source: jackguy

Growth in developers and users

The success of the Shanghai upgrade will provide a positive outlook for the future of Ethereum and attract more developers and users to the network. By leveraging on-chain data, we can piece together a comprehensive narrative to guide investment strategies and anticipate market trends.

Dive deeper

Go into more detail about how our community analysts made their long-term predictions by visiting their dashboards:

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