• Ethereum’s Shanghai upgrade is set to take place in March, which will release 16.1 million ETH ($26 billion) that was previously staked for the upgrade.
• Transaction volumes and total value locked (TVL) on Ethereum has declined since its peak in 2021 due to a range of macroeconomic and crypto-specific events.
• The recent rise in interest rates from the Fed, combined with collapsing DeFi rates have resulted in capital fleeing from the Ethereum ecosystem.
Ethereum’s Upcoming Shanghai Upgrade
The Shanghai upgrade is one of the most significant events for Ethereum and is slated for March this year. 16.1 million ETH (worth $26 billion at time of writing) has been staked as part of this upgrade, making up 15% of the entire supply.
Decline In Volumes & Value Locked
Since its peak of 1.5 million transactions per day back in 2021, transaction volume on Ethereum has come down but still remains around the million mark. Similarly, total value locked (TVL) on Ethereum has also declined significantly by 74%, now sitting at $28 billion compared to its previous high of $109 billion in November 2021.
Capital Flight From The Ecosystem
The decline in volumes and TVL can be attributed to a range of macroeconomic and crypto-specific events over the last year which have caused capital flight from the Ethereum ecosystem. The recent rise in interest rates from Federal Reserve have offered investors an alternate source of yield, while DeFi rates have also collapsed leading to further outflows from the space.
Impact Of Shanghai Upgrade On Capital Flight
It remains unclear what effect the upcoming Shanghai upgrade will have on capital flight from Ethereum’s ecosystem. With ETH set to become available for sale once more when released from staking contracts, it remains to be seen if it will lead to further outflows or if it could be used as a catalyst for increased investment into the space given its newfound liquidity availability.
Conclusion
The coming months are going to be crucial for Ethereum and its future direction as we approach March’s Shanghai upgrade date that will see millions worth of ETH unlocked and made eligible for sale again into circulation within markets – potentially impacting both prices and investor sentiment towards cryptocurrencies as a whole moving forward..
