Today is the day of Ethereum’s long-awaited Shanghai update: chances are that this is already negatively affecting ETH’s price, as it has fallen more than Bitcoin.
Yesterday the price of Ethereum was almost steadily above $1,900, but in the evening it fell below this threshold, and overnight it fell to just above $1,860.
In other words, it lost 3% precisely in the night leading up to the implementation of the Shanghai update, despite the fact that it is scheduled to be implemented during the course of today’s night.
Evidence that this -3% is not solely due to external factors is revealed by comparison with Bitcoin.
Indeed, the price of BTC overnight fell only to $29,900 from yesterday’s $30,200, a drop of less than 1%, which makes it clear that the crypto market at this time does not seem to be in such trouble as to justify a 3% price drop.
For example, Solana today is at +2%, and Polkadot at -1.5%, even though many of the major altcoins are following Ethereum’s 3% decline.
Thus it is not the crypto markets in general that are losing 3% today, but it is specifically the price of ETH that is causing such a loss to many altcoins.
Even more explicit in this respect is the ratio of the market capitalization of BTC to that of ETH.
If it had fallen as low as 2.37 on 5 April, it has now risen as high as 2.58, which is the highest since 16 July 2022.
What’s more, it was already above 2.5 on 3 April, which means that the rise in ETH’s price due to Ethereum’s Shanghai upgrade actually lasted only three days.
Summary
Buy the rumors, sell the news: the price of Bitcoin and Ethereum (ETH)
Similar dynamics happen very often in crypto markets.
In fact, many investors use this buying strategy when a hypothesis begins to spread that something positive might happen, and then sell when the hypothesis is blatantly confirmed.
This generally causes increased buying pressure well before the positive event occurs, and then causes increased selling pressure when the event is actually about to happen.
It is worth mentioning that the current price of ETH is still significantly higher than it was in the first three months of the year, so the Shanghai effect may not have worn off yet.
For example, in mid-September 2022, when there was the much-anticipated Merge that replaced Proof-of-Work with Proof-of-Stake, the price began to fall a couple of days before the event itself occurred, dropping from $1,780 to $1,220 in just ten days.
However, in the previous three weeks it had risen from $1,420 to $1,780, or +24%, which is not at all similar to the +8 % recorded in anticipation of Shanghai. So even the decline may be less extensive.
Ethereum’s Shanghai update
The fact is that Shanghai is not only a positive update, it also has a potentially negative aspect.
In fact, the update will unlock staked ETH on the new PoS-based blockchain, and some of these could be withdrawn and sold.
It has now been more than two years since ETH staking was initiated, and until now any ETH put into staking could no longer be withdrawn, thus resulting in it being locked.
Starting tomorrow, all ETH in staking can be withdrawn freely, and since there are more than 18 million of them (worth about $33.5 billion) there is a risk that a not insignificant number could end up being put up for sale in the market.
It is worth mentioning, however, that many of these ETH were staked when their market value was higher than it is today, so it is hard to imagine them being sold immediately at the risk of suffering a loss.
However, some were staked before the start of the last big bull run, when their market value was below $700, so someone might want to cash in.
Therefore, on the one hand the Shanghai upgrade is another significant step forward for Ethereum‘s evolution, while on the other hand it could cause increased selling pressure once it is applied.
Bitcoin’s price: comparison with Ethereum
By contrast, the price of BTC remains close to $30,000 for now, which is a level not seen since May 2022.
It will have to be observed how the traditional US, as well as global, financial markets react today to the annual inflation rate figure for March in the US that will be released later today.
In the event that this figure is decidedly worse than expected, which is by no means impossible, the markets could react badly, dragging the crypto markets and the price of Bitcoin behind them as well.
The fact is that there seem to be slightly optimistic expectations for this figure in the markets, so it is by no means impossible that the reality will end up being worse than expectations.
In case this happens, it will be very interesting to observe what price support the market value of Bitcoin will temporarily rest on, because until the day before yesterday the support seemed to be $28,000.
