Ethereum’s much-awaited Shanghai upgrade, also known as the Shanghai-Capella hard fork, will present itself on Wednesday. Following this, users will have access to the $31 billion worth of ether (ETH) that has been placed in the blockchain since December 2020.
The investors highly praised the upgrade as being long-term positive for the native token of Ethereum. But, instead of Ethereum, Bitcoin is outperforming the overall cryptocurrency market and gaining strength as the upgrade draws near.
According to data recorded by charting platform TradingView, Bitcoin’s dominance rate, which represents the largest cryptocurrency’s share of the entire market valuation, increased to 48.5% early Tuesday, the highest level since July 2021. This year, the metric has increased by 15%.
Between 19% and 20% is where Ether’s dominance rate remained constant. Comparatively, in the weeks leading up to September’s crucial update ‘Merge’, the percentage increased from 14% to 21%. By switching to a proof-of-stake system, Ethereum’s at-the-time energy-intensive proof-of-work technique for confirming transactions changed. Therefore the conversion paved the way for Shanghai. The blockchain system stakes the coins to increase network security and validate transactions in exchange for incentives.
A number of considerations caused investors to be cautious when pricing ether ahead of Shanghai. Concerns included worries that tokens released after the upgrade will flood the market and regulatory concerns.
Significantly, the upgrade will make over 18 million ETH available for withdrawal. Although the coins acquired only 1.1 million ETH as staking incentives. Access to the stakes will be available right away.
The processing of the partial withdrawals will take several days. Besides, analysts do not expect the subsequent selling pressure to be very strong.
On Friday, IntoTheBlock’s head of research, Outumuro, gave his perspective. Full withdrawals, which constitute the majority of the ETH staked, will take longer, he said.
Ether’s dismal performance in relation to Bitcoin: the market is not impressed
But, the market does not seem impressed, as shown by Ether’s poor performance in comparison to Bitcoin. The fact is that put options or negative wagers are more expensive than call options.
Investors are likely also suffering from regulatory worries. The US Securities and Exchange Commission (SEC) claimed that centralized exchanges’ Ethereum staking services amounted to the sale of unregistered securities in the country. The US released the claim back in February.
Last but not least, a couple of significant factors helped Bitcoin gain its strength. For example, the recent US banking sector turbulence and the dramatic repricing of interest-rate expectations globally. In the last three years, cryptocurrencies developed into large-scale assets. Therefore, they have a track record of attracting haven bids during banking crises.
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