Shapella Hardfork Sends Ethereum Traders into a Frenzy of Uncertainty: Report

"Traders anticipate heavy sell pressure after Ethereum's Shapella upgrade, causing lag in market performance and derivatives metrics compared to Bitcoin"

Traders are feeling uncertain about the upcoming Shapella upgrade on the Ethereum network, according to a report by Kaiko. The upgrade, set to take place on April 12th, will allow staked-ETH withdrawals from the Beacon Chain for the first time since its launch in December 2020. However, the upgrade is also expected to add between 1.2 million to 3 million worth of ETH selling pressure in the first few weeks, leading traders to take a cautious stance ahead of the upgrade.

Kaiko’s report shows that Ethereum’s market performance and derivatives metrics have lagged behind Bitcoin, with ETH trading volumes in spot and futures trailing behind BTC. Additionally, options market data shows that traders are actively adding short-term hedging positions. The lack of trading volumes and high options implied volatility can induce significant price volatility over the course of the month, especially when considering that sell pressure is expected to last for three to eight weeks after the upgrade.

Ethereum’s market share in USD trading volume compared to Bitcoin declined to March 2021 lows near 30%, per Kaiko data, showing that Ether has “struggled to maintain pace” with Bitcoin spot volumes. During Ethereum’s last big upgrade, The Merge, its market share relative to Bitcoin reached a high of 53%. Similarly, the relative increase in the open interest (OI) volumes for Bitcoin has surpassed Ethereum considerably with the April 10 price surge above $30,000.

The ratio between Ethereum’s spot and perpetual trading volumes also reflects the lack of trading interest. The ratio has dropped below the levels attained before the last big upgrade in September 2022, the Merge. The options market also reflected the uncertainty around the upgrade. The report found that the implied volatility for Ethereum options contracts expiring in April has trended higher than all timelines for Bitcoin. It suggests that an increasing number of traders are looking to hedge their positions.

While Bitcoin’s price had increased 82.02% year-to-date compared to Ethereum’s 59.82% surge in the same period, the ETH/USD pair faces resistance at $2,000 from the technical and psychological point of view. The Moving Average Convergence and Divergence (MACD) indicator, a momentum oscillator, has remained flat through Ether’s latest price rise, showing a lack of bullish momentum.

The uncertainty in the market due to potential selling pressure after Shapella is highlighted by Ethereum’s falling market share compared to Bitcoin and muted trading interest relative to the Merge. Traders are cautious as they prepare for the upgrade, with the lack of trading volumes and high options implied volatility indicating the possibility of significant price volatility over the course of the month. It is important for readers to conduct their own research when making investment and trading decisions.

Martin Reid

Martin Reid

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