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One of the most expected updates to the Ethereum (ETH) network was the Merge, which started on the altcoin network in September 2022. The hard fork arrived intending to bring the proof of stake (PoS) consensus model to ETH. Now, the altcoin investors await the Shanghai update.
Get to know Shanghai hard fork
Traders have extremely elevated expectations for the update that should take place in 2023. After all, Shanghai will bring liquidity to Ethereum, as the cryptocurrency units that are staking on the Beacon Chain will be released for trading.
This release comes from the proposed EIP 4895, which will also make the ETH network more scalable.
Still showing its focus on Ethereum’s scalability, EIP 4844 was proposed. At this stage of the hard fork, there will be fragmentation to increase network throughput and reduce transfer rates.
Ethereum Virtual Machine (EVM) will not be left out of Shanghai. Five proposals were made and approved by the altcoin’s developers. They will be responsible for making the execution of smart contracts more secure.
On Oct. 18 of this year, a crucial step towars the hard fork was taken. The TestNet version, Shandong, was launched.
How will Ethereum price react?
Only time will show. While there is a consensus that releasing tokens will cause investors to sell their crypto, this may not happen.
First, with attractive rewards on ETH staking, the choice may be made to leave the altcoin locked to help with network validation and still earn passive income.
Furthermore, Ethereum is not just any altcoin but the most prestigious on the cryptocurrency market.
Investors who staked ETH are also the ones who trust the cryptocurrency and placed their bet long before the Merge happened. The possibility of them wanting to dump the Ethereum price is also remote.
Finally, network upgrades are often beneficial for altcoins. ETH's transition to proof of stake proved that. Although the hard fork was priced in and the crypto did not grow much after it arrived, pre-Merge volatility was positive.
To balance this scale, there is a negative point that must be considered. Although the proposals are good, there is no guarantee that they will all be implemented in the hard fork.
The approval of developers only signals that they will be present in the testing phase. Therefore, in case Shanghai delivers less than what the market is expecting, a correction may be seen in ETH capitalization.
Vladislav Sopov