The long-anticipated Shanghai upgrade has come and gone—and contrary to widespread market fears, Ethereum (ETH) did not collapse in value. In fact, ETH prices rose slightly in the days following the activation of withdrawals. What’s more, after an initial wave of withdrawals, the network has already seen a return to net inflows of staked ETH.
This shift defied expectations. For months, analysts warned that unlocking over 18 million staked ETH—worth billions of dollars—would flood the market with supply, triggering a massive sell-off. Yet, that scenario never materialized.
So why didn’t the feared dump happen? And what does this mean for Ethereum’s future?
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Understanding the Significance of the Shanghai Upgrade
The Shanghai upgrade, completed on April 12, 2025, marked a pivotal milestone in Ethereum's evolution. It enabled validators to finally withdraw their staked ETH—a feature that had been unavailable since the launch of the Beacon Chain in December 2020.
Before this upgrade, users could stake at least 32 ETH to become validators and earn rewards under the Proof-of-Stake (PoS) consensus mechanism. However, once deposited, those funds were effectively locked. The inability to exit created a one-way flow: ETH went in, but none could come out.
This changed with Shanghai. For the first time, stakers gained full liquidity—meaning they could deposit, earn yield, and now also withdraw at will.
This wasn’t just a technical tweak; it was the final phase of Ethereum’s transition from Proof-of-Work (PoW) to PoS—a transformation years in the making.
The Three-Phase Transition to Proof-of-Stake
- Beacon Chain Launch (2020)
Ethereum introduced the Beacon Chain as a parallel PoS network to test staking mechanics. Users began staking ETH, but withdrawals were disabled. - The Merge (September 15, 2022)
The original PoW mainnet merged with the Beacon Chain, officially ending energy-intensive mining and shifting Ethereum fully to PoS. - Shanghai Upgrade (April 2025)
With withdrawal functionality enabled, Ethereum completed its PoS transition, giving users full control over their staked assets.
With all phases now complete, Ethereum stands as a fully functional, secure, and sustainable blockchain platform—ready for broader adoption across decentralized finance (DeFi), NFTs, and Web3 applications.
Why No Massive Sell-Off? Key Factors Explained
Despite fears of a market crash, ETH price held steady and even increased post-upgrade. Several interrelated factors explain why the expected sell pressure failed to materialize.
1. Gradual Withdrawal Process Limits Immediate Impact
One major reason: withdrawals are not instant. Due to network constraints, only a limited number of validators can withdraw per epoch (approximately every 6.4 minutes). Current estimates suggest around 57,600 ETH per day can be processed.
With over 18 million ETH staked, it would take more than 300 days to fully withdraw all funds—if everyone chose to do so (which they aren’t).
This built-in throttling mechanism prevents sudden liquidity shocks and gives markets time to absorb any outflows gradually.
2. Net Outflows Quickly Reversed to Net Inflows
In the first 48 hours after the upgrade, approximately 17,350 ETH was withdrawn, while only 128 ETH was newly staked—indicating strong initial demand for exits.
However, this trend reversed quickly.
By April 19, daily deposits surged to 105,300 ETH, far exceeding the 20,800 ETH withdrawn that day. Over the first week:
- 1.33 million ETH requested withdrawal
- 655,600 ETH newly deposited
- Resulting in a net outflow of ~674,400 ETH
While notable, this represents just 0.56% of total ETH supply (~119 million). Meanwhile, daily trading volume exceeds 4 million ETH, meaning market activity easily absorbs these flows.
3. Many Stakers Are Still “Underwater”
A crucial psychological factor: many early stakers are still at a loss.
Although ETH traded near $390 when staking launched in late 2020, prices soared to over $4,800 in 2021. Many who staked during or after that peak are still below their entry points—especially considering recent price fluctuations.
Fidelity Digital Assets research indicates that nearly half of all stakers entered positions when ETH was above current levels. Without profit incentives, there’s little motivation to withdraw and sell.
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4. Pre-Existing Liquidity Solutions Reduced Pressure
Even before Shanghai, users had ways to access liquidity without waiting for withdrawals.
Protocols like Lido Finance offered liquid staking derivatives such as stETH, which tracks staked ETH value and can be freely traded or used in DeFi platforms like Aave or Curve.
At the time of the upgrade, roughly one-third of staked ETH was already represented by liquid tokens like stETH. This meant much of the potential sell pressure had already been priced into markets.
Additionally, centralized exchanges like Binance and OKX provided custodial staking services with flexible exit options, further reducing reliance on native withdrawals.
Market Sentiment Shifts: From Fear to Confidence
The absence of a sell-off signals growing confidence in Ethereum’s long-term value proposition.
Rather than rushing for the exits, many validators chose to re-stake or continue earning yield, reinforcing network security and decentralization.
Moreover, the successful execution of Shanghai demonstrated Ethereum’s ability to deliver complex upgrades reliably—a critical factor for institutional adoption.
As one analyst noted: "If people wanted to exit badly, they would have used liquid staking tokens long ago. The fact that they didn’t—and now aren’t withdrawing en masse—suggests belief in Ethereum’s roadmap."
What’s Next for Ethereum?
With PoS fully operational, focus shifts to scaling and usability.
Upcoming protocol improvements—such as danksharding, proto-danksharding (EIP-4844), and further rollup optimizations—are designed to:
- Reduce transaction fees
- Increase throughput
- Improve user experience
These upgrades aim to make Ethereum viable for mass-market applications beyond crypto natives—laying the foundation for widespread Web3 adoption.
But challenges remain:
- High gas fees during peak usage
- Complexity for non-technical users
- Competition from Layer 1 alternatives
Ethereum’s success hinges on delivering seamless scalability while maintaining decentralization and security—the so-called "blockchain trilemma."
Frequently Asked Questions (FAQ)
Q: Did the Shanghai upgrade affect ETH price?
A: Contrary to bearish predictions, ETH price increased slightly post-upgrade—from $1,915 to $1,950 within a week—indicating minimal negative impact from withdrawals.
Q: Can anyone withdraw staked ETH now?
A: Yes. Any validator can initiate partial or full withdrawals through supported wallets and clients after the Shanghai hard fork.
Q: How fast are ETH withdrawals processed?
A: Due to queue limits, full withdrawals may take hours or days depending on network load. Daily capacity is capped at ~57,600 ETH.
Q: Is staking still profitable after Shanghai?
A: Yes. Annual percentage yields (APY) remain around 4–5%, with added flexibility to exit anytime—making staking more attractive than ever.
Q: Will more people start staking now?
A: Likely. With two-way liquidity (deposit and withdraw), staking becomes a more dynamic investment option, potentially increasing participation long-term.
Q: Could a sell-off happen later?
A: While possible if prices rise significantly, current data shows most holders prefer earning yield over exiting—especially given prior access via liquid staking derivatives.
The Shanghai upgrade wasn’t just about unlocking funds—it was a psychological and structural milestone for Ethereum.
It proved the network can evolve without destabilizing markets. It affirmed user trust in PoS. And it set the stage for Ethereum to become not just digital money, but a foundational layer for next-generation internet applications.
As net inflows return and staking resumes growth, one message is clear: the ecosystem is healthier—and more resilient—than ever.
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