Ether extended its rally on Friday, bringing its gain for the week to 11% at midafternoon in New York. The second largest cryptocurrency took off on Thursday after the successful completion of the Ethereum Shanghai upgrade. The upgrade unlocked $38 billion of ether that had been deposited to help run the blockchain’s operations as it transitioned to a proof-of-stake format from the more energy-intensive proof of work.
Stakers, who earn fees from lending their coins back to EthereumETH
, seem in no hurry to end their investments, some of which have been locked up since December 2020. Withdrawal requests amount to $1.8 billion, but the process can take days or weeks and only $320 million has left the blockchain so far. That was mitigated by $212 million of staking deposits in the past 24 hours, according to Nansen analyst Andrew Thurman.
“There’s been strong net outflows, but we’re reaching equilibrium faster than I personally anticipated,” says Thurman.
Ether is up 9% since Wednesday evening, when the Shanghai update went live trading at $2,084.96 according to CoinGecko.
Governance tokens for staking protocols have risen alongside ether. Lido, the market leader, and RocketPool saw the biggest gains in price, 10% and 20%, respectively, since the Shanghai update went live. Lido’s staked eth (stETH) has also benefited, up 8.6% since the Shanghai update and propelling the coin to CoinGecko’s list of top 10 cryptocurrencies.
Users looking to take advantage of price differences among different staking providers were likely to withdraw their tokens. In fact, the Kraken exchange accounts for about two-thirds of the unstaking requests because it is leaving the business in the U.S. as part of a settlement with the SEC, which considers the company’s staking program to be improper.
About 11% of the ether awaiting withdrawal comes from coins staked through Coinbase, likely exiting because of arbitrage trades through RocketPool, according Thurman.
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Crypto hedge fund North Rock LP contended in a Twitter post on Wednesday that this withdrawn ether would not hit the market as owners sought to find better deals to maximize their staking rewards.
Public crypto mining stocks have also fared well this week, with prices up 40-50%. Riot Platforms, one of the largest in the U.S. was quoted at $13.33 a share on Friday afternoon 46% higher than last week’s close.
As ether no longer uses crypto miners, the bullish results may reflect renewed investor confidence in digital assets overall.
The market’s overall value is up 5% for the week and 60% this year. BitcoinBTC
, which still uses miners and accounts for 45% of the market, is up 8.7% in the past seven days and 83% year-to-date.
Investor reaction to the Shanghai upgrade has “resonated in the larger crypto market” says Brian Dobson, managing director of disruptive technology at Chardan Capital Markets.
The Shanghai update has also been seen as a major win for institutions looking to invest in digital assets with minimized risk. “Institutions will be able to stake and earn a yield that mirrors fixed financial instruments such as bonds in traditional capital markets,” Mona El Isa, CEO of blockchain-based finance firm Avantgarde Finance said in an emailed statement to Forbes. “After the Shanghai fork, staking yields from Ether could be synonymous with the risk-free rate that traditional capital markets use to price their assets.”
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