25. September 2023

Ethereum Upgrade Shanghai to Supercharge Liquid Staking Derivatives

• The crypto market witnessed a DeFi summer in 2020, with the price of Ether nearly doubling and total liquidity across DeFi protocols quickly surging to $10 billion.
• Toward the end of 2020 and early 2021, the COVID-19-induced quantitative easing caused a mega-bull run, with Ether’s price increasing nearly ten times to a peak above $4,800.
• The shift to an environmentally-friendly proof-of-stake (PoS) consensus mechanism was a big step forward and reduced Ether inflation post-merge.

The crypto market experienced a summer of decentralized finance (DeFi) in 2020, with Ethereum (ETH) being the primary beneficiary. As traders began to capitalize on the various yield-farming and liquidity-mining opportunities, the price of Ether nearly doubled from its previous price to $490. This increase in price was accompanied by a surge in total liquidity across DeFi protocols, quickly reaching $10 billion.

However, this euphoric bullish trend was short-lived, as the COVID-19-induced quantitative easing caused a mega-bull run that lasted almost a year. During this time, Ether’s price increased nearly ten times to a peak above $4,800. Unfortunately, the positive momentum was not sustainable, as the UST-LUNA crash began in early 2022, taking Ether’s price down to $800.

Fortunately, the crypto market was given a ray of hope in the third quarter of the same year, as a positive rally was led by the Ethereum Merge narrative. This shift to an environmentally-friendly proof-of-stake (PoS) consensus mechanism was a big step forward, as it would reduce Ether inflation post-merge. In the lead-up to the Merge on Sept. 15, 2021, ETH peaked at over $2,000. However, the bullish momentum faded quickly, with traders turning the Merge into a buy-the-rumor and sell-the-news event.

Now, traders are contemplating what will happen to ETH price and staked Ether derivatives after the next network upgrade opens withdrawals for stakers. This upgrade, called Shanghai, could have a significant impact on the liquid staking derivatives market. If implemented correctly, the upgrade could supercharge liquid staking derivatives and make them more attractive to investors.

In addition, Shanghai will bring a number of improvements to the Ethereum network, including increased scalability, improved privacy, and better account security. These improvements will make the Ethereum network faster and more secure, allowing for more efficient transactions.

With Shanghai set to be released soon, traders are eager to see how it will affect the price of Ether and staked Ether derivatives. If the upgrade is successful, it could lead to a new wave of bullish momentum and an increase in the number of investors looking to capitalize on the opportunities that it presents. However, only time will tell if the upgrade will be successful and if it will result in a prolonged bullish trend.