The Web3 ecosystem is re-entering a bullish phase, with Ethereum—widely regarded as the foundational infrastructure of decentralized applications—recently completing a pivotal network upgrade. Known as the Shanghai upgrade, this milestone marks the final stage in Ethereum’s transition to a full proof-of-stake (PoS) consensus mechanism. The most anticipated change? For the first time, validators can now withdraw their staked ETH from the Beacon Chain.
This long-awaited functionality was expected by some to unleash massive selling pressure on ETH, given that over 18 million ETH (approximately 16% of total supply) had been locked for more than two years. Yet, one week after the upgrade went live, the feared market dump never materialized. In fact, ETH prices rose slightly post-upgrade, and staking activity has resumed a net inflow trend.
So why didn’t the floodgates open? And what does this mean for Ethereum’s future?
The Road to Full Proof-of-Stake
To understand the significance of the Shanghai upgrade, we must revisit Ethereum’s journey toward PoS.
Before 2022, Ethereum operated under a proof-of-work (PoW) model—similar to Bitcoin—where miners used energy-intensive hardware to validate transactions and earn block rewards. While effective, this method faced criticism for high energy consumption and limited scalability.
In response, the Ethereum Foundation initiated a multi-phase transition to PoS, aiming to improve security, reduce environmental impact, and enhance decentralization. This transformation followed a “three-step” roadmap:
- Launch of the Beacon Chain (December 2020): A parallel PoS blockchain introduced to test staking mechanics. Users could deposit at least 32 ETH to become validators and earn staking rewards (around 5% APY), but withdrawals were disabled.
- The Merge (September 15, 2022): Ethereum’s PoW mainnet merged with the Beacon Chain, officially ending mining and shifting consensus entirely to PoS. This reduced energy use by over 99%.
- Shanghai Upgrade (April 12, 2024): Enabled full withdrawal functionality—both partial and full unstaking—for the first time.
With Shanghai, Ethereum’s PoS transformation is now complete. But contrary to bearish expectations, ETH didn’t crash.
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Minimal Market Impact Despite Unlocking Millions in ETH
Just hours after the upgrade, around 17,350 ETH were withdrawn, with only 128 ETH newly deposited—indicating initial net outflow. However, this trend quickly reversed.
According to real-time data from Token Unlock, within seven days of the upgrade:
- 1.33 million ETH were requested for withdrawal
- 655,600 ETH were newly staked
- Net outflow: approximately 674,400 ETH
That represents just 0.56% of Ethereum’s total circulating supply (~119 million ETH). Meanwhile, ETH’s 24-hour trading volume reached 4.12 million ETH, far exceeding daily withdrawal volumes. This shows that market liquidity easily absorbed any released tokens.
Moreover, daily staking inflows have surpassed withdrawals since April 19:
- 20,800 ETH withdrawn
- 105,300 ETH staked
Total staked ETH now stands at about 17.36 million, with roughly 721,000 ETH still queued for withdrawal due to processing limits.
Why Isn’t Everyone Cashing Out?
Several key factors explain the muted sell-off:
1. Withdrawal Delays Act as a Natural Buffer
Due to network constraints, only about 57,600 ETH can be processed daily for withdrawal. At this rate, it would take over 300 days to fully unstake all locked assets. This staggered release prevents sudden market shocks.
2. Many Stakers Are Still "Underwater"
A significant number of users entered staking during ETH’s bull run in 2021, when prices peaked near $4,871**. With ETH trading around **$1,950 post-upgrade (up from $1,915 pre-upgrade), many remain in loss-making positions and lack incentive to exit.
Fidelity Digital Assets research indicates that nearly half of new stakers joined during market rebounds while still holding unrealized losses—further reducing withdrawal motivation.
3. Liquid Staking Derivatives Reduced Urgency
Long before Shanghai, solutions like Lido’s stETH allowed users to maintain liquidity without unstaking. These derivatives offer 1:1 pegs to staked ETH and are freely tradable on DeFi platforms.
Fidelity estimates that one-third of staked ETH was already liquid via such instruments. This pre-existing liquidity significantly dampened the urgency—and therefore market impact—of actual withdrawals.
A Sign of Maturation and Confidence
The absence of a sell-off reflects growing confidence in Ethereum’s long-term value proposition. Rather than fleeing the network, many validators are reinvesting—either restaking or adding new capital.
This resilience signals that Ethereum is maturing beyond speculative cycles into a stable, yield-generating digital infrastructure layer.
“The Shanghai upgrade isn’t just technical—it’s psychological. It proves users trust the network enough to keep staking even when they can leave.”
— Crypto Analyst, On-Chain Insights
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Looking Ahead: What’s Next for Ethereum?
With PoS now fully operational, focus shifts to scaling and usability. Key priorities include:
- Improving transaction throughput via rollups and danksharding
- Reducing gas fees for mainstream adoption
- Expanding real-world asset (RWA) tokenization
- Strengthening decentralized identity and privacy layers
These developments will determine whether Ethereum can support mass-market Web3 applications—from decentralized social networks to on-chain finance.
Frequently Asked Questions (FAQ)
Q: What was the main goal of Ethereum’s Shanghai upgrade?
A: The primary objective was to enable withdrawals of staked ETH and validator rewards—completing Ethereum’s transition to a fully functional proof-of-stake system.
Q: How much ETH has been withdrawn since the upgrade?
A: As of one week post-upgrade, about 1.33 million ETH were requested for withdrawal, with a net outflow of ~674,400 ETH after accounting for new deposits.
Q: Why didn’t ETH price drop after unlocking staked tokens?
A: Withdrawals are rate-limited (~57k ETH/day), most stakers are underwater, and liquid staking derivatives already provided liquidity—reducing immediate selling pressure.
Q: Can anyone unstake ETH now?
A: Yes. Validators can fully or partially withdraw their staked ETH and accrued rewards through official clients or exchanges offering withdrawal services.
Q: Is staking still profitable after Shanghai?
A: Yes. Annual yields remain attractive (~4–6% depending on network conditions), especially with improved flexibility and reduced lock-up risk.
Q: Could a larger sell-off happen later?
A: While possible if prices rise significantly, current trends suggest sustained reinvestment. Long-term sentiment remains positive among institutional and retail stakers alike.
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Conclusion
Ethereum’s Shanghai upgrade has passed its first major market test with flying colors. No crash. No panic. Instead, renewed inflows into staking suggest strong conviction in the network’s future.
This moment marks more than a technical achievement—it’s a psychological turning point. Users now have full control over their assets, yet many choose to stay. That kind of organic commitment speaks louder than any price surge.
As Ethereum evolves into a scalable, sustainable foundation for Web3, its ability to retain value—and participants—will define its next chapter. And so far, the outlook is promising.