Bitcoin’s Rally and Ethereum’s Shanghai Update Fuels Crypto Market Momentum

Bitcoin, Ethereum, and other popular cryptocurrencies are all up today, and the crypto market is showing more green than red

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Bitcoin, Ethereum, and other popular cryptocurrencies are all up today, and the crypto market is showing more green than red. The top two cryptocurrencies by market value each saw gains as investors contemplated worse official numbers in the jobs market, which paradoxically would be better for risk assets like crypto. While the 2023 banking crisis continued to send shockwaves in the traditional finance markets, trading volatility remained quite light in crypto.

With this in mind, let’s take a look at what is happening with the crypto markets at the moment, and what to expect from BTC and ETH in the near future.

Bitcoin Pushes Crypto Market Cap to $1.19 Trillion

Bitcoin’s massive 70% rally has helped push the total market capitalization of all cryptocurrencies to the highest level since June. The rise in the overall crypto market cap stands out because the crypto industry is facing one of the strongest crackdowns in history. Despite the bleak regulatory outlook, the crypto market cap has now risen to $1.19 trillion from the $800 billion market cap at the beginning of 2023.

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Amid the surge, Bitcoin’s overall market share has risen, with its dominance over other cryptocurrencies hitting a nine-month high of 45.5%. Last month, Bitcoin also achieved its best quarterly performance in over two years and became one of the top-performing assets globally.

On Monday, Bitcoin fell below the $28,000 threshold after a rumour spread that Binance was in trouble and its founder faced an international law enforcement request to detain him. But Binance has since denied it, and it came out to be just a rumour. Currently, Bitcoin is back above the $28,000 mark and is currently trading at around $28,150. Historically, April has been a good month for Bitcoin, so there is a chance for this rally to continue.

Ethereum Prices Surge Before The Shanghai Update

Yesterday, Ethereum jumped to a 9-month high as the much anticipated Shanghai update is expected to hit the Ethereum blockchain later this month. The second largest token reached $1,937, its highest price since August 2022. At the time of writing, Ethereum is trading at $1,900, representing a 60% year-to-date gain. The update has apparently prompted investors and traders to put capital into Ethereum and other staking-focussed tokens.

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Ethereum’s backward-incompatible Shapella hard fork or Shanghai upgrade is scheduled for March 12, and it aims to solve the prevalent problems of the Ethereum 2.0 transition. While the Ethereum merge successfully shifted the blockchain to a proof-of-stake consensus, it could not remove the cost issue. Currently, the minimum amount of Ethereum you need to stake is 32 ETH, and you can not un-stake your staked Ethereum. This left users’ ETH locked on the blockchain until they could be released.

The Shanghai upgrade will enable users to remove their staked ETH and acquired rewards. More than 18 million Ethereum has been staked on the network since the beacon chain went live in December 2020. However, there will be a cap of around 43,200 ETH per day for withdrawals. Ethereum has recently been underperforming Bitcoin, its gain so far this year trailing the top token by 14%. But that dynamic could change fast ahead of the upcoming Shanghai update.

Big Ethereum Sell-off is Unlikely

There is lingering fear in the market that the impending unlocking of deposited ETH would see some holders rush to liquidate their Ethereum tokens. According to market analysts, the selling pressure is potentially worth a couple of billion dollars. In addition to 1.1 million ETH of partial rewards, Celsius Network is likely to sell off its 158,176 staked ETH as a part of its bankruptcy process. It adds up to nearly 1.3 million ETH or $2.4 billion.

According to data from popular cryptocurrency exchanges like Gate.io, the expected supply boost of $2.4 billion is only around 20% of Ethereum’s average daily trading volume. And as per analysis, partial withdrawals will likely take five to six days to process. The selling pressure will be evenly distributed over several days thanks to the daily limit. This would allow buyers to match the selling pressure without heavily impacting the price of Ethereum.

Moreover, a large percentage of Ethereum stakers are long-term investors and are unlikely to sell off their holdings right after the upgrade. Around 46.3% of the staked ether is in profit as Ethereum’s current price is higher than when these coins were locked on the blockchain. If we exclude coins staked through liquid staking services, this number further drops to 24.2%. And long-term investors have staked around 16% of all Ethereum before February 2021. The majority of this group is unlikely to sell off a substantial amount of Ethereum as the token is currently trading 63% below its all-time high.

Summary

The crypto market is experiencing a significant upswing, with Bitcoin and Ethereum leading the charge. Despite the ongoing banking crisis and regulatory crackdowns, both cryptocurrencies have shown remarkable resilience, with Bitcoin’s dominance reaching a nine-month high and Ethereum’s anticipated Shanghai update sparking investor interest. There are indications from metrics used to forecast the value of ETH, the primary cryptocurrency fueled by smart contracts, that its worth could reach up to $2,300 in the coming days. While concerns about a major Ethereum sell-off persist, the market structure and long-term investor presence suggest that any potential selling pressure is likely to be absorbed without causing a severe impact on Ethereum’s price. As the crypto market continues to navigate uncertain times, the current momentum in Bitcoin and Ethereum is a testament to the industry’s adaptability and potential for growth.

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