The Shapella upgrade last month allowed validators to unstake millions of ETH from the Ethereum 2.0 contract, potentially leading to the funds being sold on the open market. However, to the surprise of many, the second-largest cryptocurrency actually increased in value after the upgrade.
At Consensus 2023, CryptoPotato interviewed representatives from Nansen, a blockchain analytics company, to discuss how things have looked on-chain since the final phase of the Merge.
Shanghai Defies Expectations
Ahead of the upgrade, Nansen Content Lead Andrew Thurman predicted that net outflows from Ethereum’s staking contract would continue for several weeks. However, withdrawals appeared to have flattened out within a matter of days according to the firm’s on-chain analysis.
“We knew that entities with exposure to US regulatory, for example, Kraken and Coinbase, where there was clear indication that staking as a business was going to undergo some regulatory challenges – we know those people want to unwind their positions, so that’s a big overhang” said Jason Xu, Senior Product Manager at Nansen in an interview with CryptoPotato.
This held true to some extent, with Kraken alone accounting for 67% of all ETH withdrawals from the staking contract immediately after Shapella. The company was fined $30 million by the SEC and forced to shut down its staking service before the upgrade. Coinbase, which was issued a Wells Notice by the SEC, was responsible for another 11%. However, the withdrawal overhang from both firms has since “flattened out” and their shares of total ETH principal withdrawals have since changed, according to Nansen’s Shanghai dashboard.
According to Xu, there likely wouldn’t be any heightened interest from new retail participants to start staking since they already have access to liquid staking derivatives like Lido. He expects such services, which provide stakers with a 1:1 convertible liquid token for their locked, staked ETH, to succeed well into the future as users find it difficult to stake on their own.
As of May 8, over 19.3 million ETH is locked away for staking, which is more than before Shapella was activated. Xu added that many “smart money” investors are mainly holding “different variants of staked ETH.”
FUD vs. Facts: Binance Withdrawals
There were rumors of a sudden influx of withdrawal requests on Binance in March, shortly after the global crypto exchange was sued by the Commodities and Futures Trading Commission (CFTC). However, according to Nansen Ecosystem Growth Manager Aurélie Boiteux, these claims were exaggerated. In reality, many large exchange withdrawals, including those from Binance, were simply being sent to another Binance wallet.
“We saw a lot of drama on Twitter, and people tend to react really too quickly, maybe just for fear, for example, by fear and anything. But so far on-chain, I don’t recall a really big issue regarding regulatory in that aspect.”
Boiteux stated that volume at Binance didn’t seem to experience any statistically significant change on-chain after the CFTC lawsuit, unlike the FTX debacle in November. However, she refused to provide any specific price predictions for the future.
Xu, on the other hand, remained bullish, stating that his opinion is “to the moon.”