According to a research report by Bernstein, the price of Ether (ETH) is expected to remain “cautious” until the Shanghai upgrade of the Ethereum blockchain later this month, due to concerns of a supply overhang.
The Shanghai fork will allow ETH that has been staked and locked to be withdrawn for the first time, leading to weak sentiment and potentially putting pressure on ETH’s price before the upgrade. Bernstein’s analysis shows that supply increases are likely to be spread over a few weeks or even months, resulting in little selling pressure on a daily basis. However, the market expects the removal of the lock-in to lead to more people staking their ETH, giving investors confidence with unstaking.
The analysts at Bernstein noted that the upgrade may attract some additional staking from institutional investors who may not want to stake through liquid staking platforms. The report also highlighted that the “steady-state staking penetration” for Ethereum will gradually increase, and the Shanghai upgrade is a step in that direction. On the positive side, the widespread adoption of existing pooled staking tokens that have held their peg well negates the case for a significant increase in staking immediately after the upgrade.
Despite the cautious outlook, Bernstein remains positive on Ethereum’s future, citing the network’s growing use cases and the increasing adoption of decentralized finance (DeFi) applications. The research firm believes that DeFi and other Ethereum-based applications will continue to drive demand for ETH, and the supply overhang will not have a long-term impact on the cryptocurrency’s price.
