Only 16% of Ethereum stakeholders are in profit ahead of the Shanghai upgrade

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With Ethereum’s Shanghai upgrade scheduled for April, ETH holders will finally have the opportunity to withdraw their staked coins. The big concern is: will they sell?

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Ethereum: what does Shanghai bring?

Ethereum’s Shanghai upgrade is just around the corner – and that means users are starting to place their bets.

All the attention given to this particular upgrade is based on one thing: the withdrawal of Ethereum stakes. Since the introduction of staking in December 2020, when the network began its journey towards a proof-of-concept consensus algorithm, those who had their funds locked up were unable to withdraw the coins.

That is expected to change in April. But is that a cause for concern or a cause for celebration?

Some argue that people will quickly withdraw their ETH and sell it to make a profit. However, these profits should not be very large.

If you held your holdings on December 1, 2020, the ETH price would be $612. If you sold at current prices, you would make a whopping 156% profit.

ETH price from the day the Beacon Chain was launched until now. Source: CoinGecko.

While these are respectable gains, they are for a fairly small majority of users. In fact, since betting began, only 16% of punters have made money in dollar terms, according to data from Dunne. If the upgrade were to happen today, the vast majority of users would incur some major losses.

How much committed capital is in profit? Source: Dunne.

Is Shanghai going bearish or bullish?

You never know what people will do when they have double digit losses. Still, the money is about $6.25 billion. Some are considered likely to sell. At least that’s the bear’s argument.

The bull argument is this: after nearly three years of developers finally making the long-awaited “merger” upgrade, people will be doubling down on their bets. The risk profile of betting goes down a lot when people see that if they put their money in that black box, they can make a return and take the money out of that black box whenever they want.

Several DeFi projects are also making this bet and introducing a unique leverage mechanism.

Aave’s latest upgrade, for example, does exactly that. It works like this: you deposit your Ethereum in Lido Finance’s liquid stacking protocol to get Staked ETH (stETH); you use this steETH to borrow more Ethereum on Aave; take the Ethereum back from Lido and repeat the cycle – depending on how you feel.

Spark Lend, a yet-to-be-launched product from a handful of MakerDAO engineers, also wants to offer such a tool. Of course, this is very risky – and if Ethereum becomes volatile, you could be liquidated quickly.

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