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The Ethereum Shanghai Upgrade is scheduled to happen in April 2023. After the successful implementation of Ethereum Merge on September 15th, 2022, there has been a significant level of excitement in the Crypto community about what the future holds for Ethereum. But there’s a lot to the story waiting to be unveiled.
We know the Merge is majorly about the shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS), and this shift has impacted ETH at a broader level, along with other staking tokens. So let’s learn about the tokens that could be majorly affected after the Shanghai Upgrade.
But before, let’s take a detour and look at how the idea of the Merge clicked and how things will change in the future.
A look back at the past…
During the DeFi summer of 2020, popular decentralized finance applications such as Compound and Uniswap transformed Ether and Bitcoin into yield-bearing assets via yield farming and liquidity mining rewards, causing their prices to drop to $1,710 and $24,831, respectively. Ether’s price almost doubled to $490 as the total liquidity across DeFi protocols surged to $10 billion.
Later, in late 2020 and early 2021, global markets were heavily influenced by COVID-19-induced quantitative easing, resulting in a mega-bull run that lasted nearly a year. Ether’s price skyrocketed to a peak above $4,800, increasing nearly tenfold.
Following the end of the bullish phase, Ether’s price went through a painful cool-down journey, which was worsened by the UST-LUNA crash that began in early 2022. As a result, Ether’s price dropped to $800. However, in the third quarter, the market experienced a positive rally led by the Ethereum Merge narrative, offering a ray of hope.
A peek into Shanghai Upgrade
With the upcoming Shanghai upgrade scheduled for April 2023 taking center stage, a similar bullish opportunity may be brewing for Ether as it happened at the time of the Merge’s announcement. The Shanghai Upgrade will allow withdrawals from currently locked Ethereum staking contracts, reducing the risk of staking ETH and presenting a significant opportunity for liquidity staking protocols to expand. As the hype continues to build, the governance tokens of some of these protocols have risen since the start of the new year.
It is possible that the upgrade may push these tokens to heights similar to last year’s Merge highs. Additionally, Ethereum’s staking space is still in its early stages, providing a market opportunity for the growth of these protocols.
To learn more about the Shanghai Upgrade, click here.
In the following section, let’s have a look at the tokens that can be impacted hugely by the upgrade.
Tokens that can be impacted by Shanghai Upgrade
#1 Lido DAO (LDO)
Lido DAO is currently the leading liquid staking platform, with a higher annual yield and market share than other protocols. It has a significant share of 88.55% of the total Staked Ether across these platforms.
However, there are some weak points in the project’s token economics. The LDO token is a governance token, which means that holders do not have the right to share in the generated yield or fees.
From a technical perspective, the LDO token has broken through a short-term resistance level with significant buying volume. As a result, bulls are expected to target this token and take advantage of the excitement surrounding the upcoming Shanghai upgrade.
#2 Rocket Pool (RPL)
Rocket Pool is a smaller platform compared to Lido, with a similar function as a liquid staking provider. However, the market capitalization to stETH ratio of Rocket Pool is five times larger than that of Lido, which may indicate that it is overpriced.
However, the RPL token offers additional utility beyond governance as an insurance token for users. Node operators stake RPL as insurance; in the event of losses due to the operator’s fault, users receive the staked RPL.
The RPL token achieved a high of $34.30 around the time of the Ethereum Merge in September 2021. Since the beginning of 2023, its price has increased, and recently it’s trading at around $50. It’s evident that the price of RPL tokens is likely to shoot up due to the Shanghai Upgrade announcement.
#3 Ankr (ANKR)
Ankr provides blockchain infrastructure such as API endpoints, RPC nodes, and staking solutions. Like Lido, the ANKR token is solely used for governance purposes.
The market capitalization to staked Ether ratio of Ankr is comparable to Rocket Pool, which may indicate that it is overvalued.
However, if excitement around the Shanghai upgrade grows, the price of ANKR could potentially reach its peak from August 2021. Presently, the ANKR token is trading at around $0.029.
#4 Stakewise (SWISE)
Stakewise is a staking platform that offers the highest yield. Compared to other governance tokens like RPL and ANKR, SWISE is relatively less inflated in the market capitalization to staked Ether ratio, making it a cheaper option.
However, there is a downside as a significant portion of the token’s distribution is in the hands of private investors and the founding team, owning almost 47% of the total supply. Smart money wallets have been slowly accumulating SWISE since April 2021, according to Nansen data. If the trend continues, for the Shanghai Upgrade, the buyers may aim for the Ethereum Merge high of $0.23.
Bottom line
The 4 Crypto tokens mentioned above will most likely be highly impacted due to the Shanghai Upgrade. You can consider investing in them, but it is advisable to do your own research before making any investment decision.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
