The adoption of Shapella last month was the most anticipated event for Ethereum and its community since the Merge. This was mostly due to the activation of staked ETH withdrawals from the Beacon Chain. Shanghai and Capella were the two phases of the upgrade.
Ethereum transitioned from a power-hungry proof-of-work method to an environmentally friendly proof-of-stake mechanism. On April 12, this update was successfully finished. After three years, investors were finally allowed to withdraw their staked Ethers from the Beacon chain.
Recently Nansen Research published a report on Ethereum’s performance since the upgrade. Following over a million ETH in withdrawals in the first week, the quantity of ETH staked has already surpassed the amount of ETH withdrawn. Including awards, there were 19.3 million ETH on the Beacon Chain at the time of the upgrade (about 19.1% of the circulating supply). Since then, there have been 2.43 million ETH in withdrawals. As well as 2.2 million in deposits, and 102 thousand ETH burnt. This resulted in a net of 130 thousand ETH entering circulation. There are 600k active validators securing the network.
During the initial two weeks after the Shapella incident, a large proportion of withdrawn ETH consisted of partial withdrawals. In contrast, validators who wanted to withdraw their entire amount of ETH had to leave the network and join the exit queue. This could take a few weeks. However, the situation has changed, and now full withdrawals account for the majority of withdrawn ETH at 59.2%. At the same time, partial withdrawals account for 40.8%.
According to the report, Up to this point, Kraken has withdrawn the largest amount of ETH totalling over 647,000, with the majority being principal tokens. Kraken’s withdrawals have accounted for about 26.3% of all ETH withdrawals after the upgrade. The reason for this is that the exchange’s staking service has come under regulatory scrutiny, resulting in Kraken having to return the staked ETH to its platform’s depositors. Kraken has staked around 1.4 million ETH through their service, indicating that approximately half of the ETH is still on the Beacon Chain.
Regarding those who partially withdrew their ETH, the largest portion of the distribution, at 50.8%, was sent to miscellaneous addresses. Meanwhile, 23.7% were sent to centralized exchanges (CEXs), and 22.6% were used for re-staking. This group of individuals is less inclined to take profits and is generally less pessimistic as they continue to run validator nodes, and staking rewards are automatically processed. Therefore, some of the ETH withdrawn by partial withdrawers would be returned to the Beacon Chain to generate more yield.
The current model only considers validators who are currently in the process of withdrawing and does not predict how many validators will exit in the future. It also assesses the situation based only on current on-chain statistics.
Based on these statistics, we can infer that the selling pressure on ETH after withdrawals has not been significant. This is evidenced by the fact that deposits have nearly matched the amount of ETH coming into circulation. Therefore, the elimination of unstaking risks has so far balanced out the selling pressure caused by withdrawals. Moreover, a significant portion of the ETH withdrawn is probably not intended for sale.