• Ethereum token unlock may not be a negative event for ETH with the existence and relevance of liquid staking derivatives. 
  • Experts argue that unlocking ETH tokens when the altcoin is 50% below its all-time high will be a non-event. 
  • Ethereum’s shrinking supply and bullish momentum pushed Ethereum above previous range highs; experts predict a rally to $2,000. 

Ethereum transition from Proof-of-Work to Proof-of-Stake (PoS) was the last major upgrade to the altcoin’s blockchain. The Shanghai hard fork and token unlock is next key event in Ethereum. The shift to PoS purged 70,000 ETH tokens from the altcoin’s circulating supply. 

Experts are bullish on Ethereum’s price rally to $2,000, and believe that the token unlock will turn out to be a non-event with the option of stakers pouring ETH into liquid staking derivatives.

Also read: Ethereum price steadies above $1,700 as ETH holders grow confident ahead of token unlock

Ethereum token unlock could be non-event with LSD tokens narrative 

Adriano Feria, an AI advocate and crypto analyst argues that the bear case for the ETH token unlock ignores the existence of liquid staking derivatives and assumes that stakers are 100% illiquid going into Shanghai. 

Stakers are considered to be high conviction holders that are certainly not planning to sell during a bear market. Unlocking staked ETH tokens at a time when the altcoin is 50% below its all-time high makes it a non-event. The tailwind from re-staking ETH could help the altcoin sustain its deflationary trend. 

As the ETH token unlock draws close, Liquid Staking Tokens are making a comeback. Lido leads in new ETH staking deposits with 45,600 ETH staked since March 22, representing 36.4% of 7 day ETH deposits.

ETH deposits in Lido

ETH deposited on Lido

Liquid Staking tokens begin recovery, offering alternative to selling ETH at a loss

With Ethereum price nearly 50% away from its all-time high, it is likely that validators unlocking their staked ETH are likely sitting on unrealized losses. Instead of realizing losses and selling ETH below the price at which the tokens were acquired, Liquid Staking projects are offering lucrative yields and there has been noticeable recovery in their tokens since Tuesday. The following chart shows between 3 and 4% gain in Liquid Staking tokens overnight. 

Liquid Staking tokens

Liquid Staking tokens 

Frax Ether recently revealed increasing protocol revenues despite losses, with the upcoming ETH token unlock acting as a bullish driver for the loosely-pegged Ethereum stablecoin. The capital waiting on the sidelines to be unlocked will help lower the execution risk of Ethereum and debunk Fear, Uncertainty and Doubt around new Liquid Staking projects and their tokens.

Ethereum supply nosedives by nearly 70,000 ETH

Ethereum supply plunged with the altcoin’s Merge, or the transition event to PoS. Nearly 70,000 ETH tokens have been pulled out of circulation, effectively reducing the selling pressure on the second-largest cryptocurrency by market capitalization. 

Ethereum Supply Decreasing Post Merge

Ethereum Supply Decreasing Post Merge

A decrease in the volume of tokens under circulation is typically considered bullish for an asset. 

Can Ethereum’s shrinking supply fuel ETH rally to $2,000?

Ethereum’s shrinking supply is one of the bullish drivers for the altcoin. Pentoshi, a crypto analyst on Twitter has predicted an Ethereum price rally to $2,000. The largest altcoin made a recovery above previous range highs after a retest on Tuesday. According to the expert a rally above the $1,778 level is a bullish sign. 

ETH/USD 1D price chart

ETH/USD 1D price chart 

A drop below the previous range high could invalidate the bullish thesis for the smart contract network’s token. Pentoshi is bullish on the altcoin since it made a swift recovery from the FUD surrounding regulatory crackdown on the largest cryptocurrency exchange in the ecosystem, Binance.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content

Recommended Content

Editors’ Picks

Ripple proponent attorney slams Michael Saylor’s stand on Bitcoin as perfect money, XRP dips to $0.47

Ripple proponent attorney slams Michael Saylor’s stand on Bitcoin as perfect money, XRP dips to $0.47

Ripple proponent Bill Morgan slams Michael Saylor for promoting Bitcoin as perfect money. XRP Ledger AMM has crossed a milestone of 20 million XRP tokens in Total Value Locked.

More Ripple News

Bitcoin price stalls as BTC miners reserve dwindle; market watches for impact

Bitcoin price stalls as BTC miners reserve dwindle; market watches for impact

Bitcoin spot ETFs show continuous outflow from June 13 to June 21. BTC miners have also seen a decline in their reserves. Bitcoin price is trading inside a descending wedge, and a breakout above $64,600 signals a bullish move.

More Bitcoin News

Week ahead: Bitcoin dips under $63,000, meme coins fade with steep correction in top five

Week ahead: Bitcoin dips under $63,000, meme coins fade with steep correction in top five

Bitcoin dipped under $63,000 on Monday, lowering crypto market capitalization by over 3%, per CoinGecko data. BTC is in a state of decline, and news of VanEck’s Spot Bitcoin ETF launch in Australia failed to improve traders' sentiment. 

More Cryptocurrencies News

Pepe poised for 20% crash

Pepe poised for 20% crash

Pepe price breaks below the ascending trendline support on Sunday, suggesting  a bearish move. On-chain data suggests that PEPE’s active addresses are decreasing, signaling lower demand for the network.

More Pepe News

Bitcoin: Is BTC out of the woods?

Bitcoin: Is BTC out of the woods?

Bitcoin appears poised for a slight decline this week, influenced by factors such as the German Government's deposit of over 1,700 BTC in exchanges, decreasing outflows in US spot ETFs, and on-chain data indicating no signs of BTC DeFi liquidation. 

Read full analysis