Ethereum’s Shanghai fork is coming — but it doesn’t mean investors should dump ETH

Ethereum’s next big upgrade, Shanghai, is on the horizon for March. The Shanghai hard fork will implement further improvement proposals for the Ethereum network as well as enable Ether (ETH) stakers and validators to withdraw their assets from the Beacon Chain.

At the time of writing, staked ETH represents approximately 14% of the total supply, or 16 million coins. It equates to over $25 billion at ETH’s current price, a substantial sum that will gradually become liquid following the fork.

Some ETH stakers have waited over three years to withdraw their rewards. Does that mean most of them will line up to withdraw and sell their ETH as quickly as possible? This scenario is improbable. There are numerous reasons why investors shouldn’t be concerned about the impending update, and even more why most Ethereum stakeholders will increase their investment into staking following Shanghai.

Ethereum will remain the leading PoS network

Although ETH is the second-largest cryptocurrency by market cap, Ethereum is the leading proof-of-stake (PoS) network. At the time of writing, it accounts for approximately 65% of the total value locked in decentralized finance (DeFi) protocols, sitting at around $48.7 billion.

Despite the current market, the amount of ETH deposited over time has continued to increase at a steady, stable rate, reaching over 500,000 validators in January 2023.

Staking yield remains strong

The staking yield remains stable and currently sits at about 5.45% annual percentage rate (APR). Therefore, new entrants should familiarize themselves with the overall yield compensation structure consisting of staking rewards, tips and maximal extractable value (MEV).

With MEV-Boost, stakers can increase their rewards 2x–3.5x over vanilla blocks. However, when demand for ETH is on the rise, it is tips and MEV that ultimately improve ETH staking yields. Since moving to proof-of-stake, MEV relayers have relayed approximately 85,000 ETH and facilitated an increase of 32,500 ETH in additional rewards.

Liquidity attracts stakers

As with any market, liquidity is king. Most investors were originally reluctant to stake ETH when it became available because doing so required locking up their funds for an undetermined period of time. Staking ETH required a minimum of 32 ETH, meaning that when Eth2 launched in December 2020, the price of entry was around $19,000. At its peak in November 2021, the price was nearly…