Ethereum’s Shanghai upgrade has sparked another token frenzy, with investors betting on the upgrade’s success
Speculators are increasingly betting on tokens linked to the next Ethereum network upgrade, which is known as Shanghai, Bloomberg reports.
The much-anticipated upgrade is expected to take place in March. It will make it possible for Ether holders to withdraw their staked coins.
Prices of various cryptocurrencies have increased significantly in recent weeks just months after the infamous FTX implosion that made experts revisit their gloomiest forecasts for the nascent crypto industry.
Liquid staking apps saw plenty of love from investors, with the coins of Lido and Rocket Pool recording significant price jumps. Such apps allow Ethereum holders to earn yield without having to liquidate their tokens.
The recent rally is similar to the one that took place ahead of the much-anticipated software upgrade known as the Merge in September, which made it possible for the second-largest blockchain to switch to a new consensus algorithm called proof-of-stake.
Henry Elder, the head of decentralized finance at Wave Financial, told Bloomberg that people are anticipating an uptick in adoption following Shanghai.
The LDO token, which serves as the governance token of the Lido app, has seen a triple-digit increase since early November when the entire cryptocurrency market experienced a massive crash due to the collapse of the FTX exchange. Lido has now become the number one decentralized-finance application, with more than $8 billion being locked in the protocol.
Roughly a fifth of Ether tokens in circulation will be staked by the end of 2023 once withdrawals get enabled.
After Shanghai, withdrawing staked Ether from the Ethereum network may still take a long period of time. While the liquidity of the tokens is likely to improve, there is a risk that they will get stuck.
There is also a risk that speculators who ran up the prices of the governance tokens for liquid-staking apps will sell just on the verge of the implementation of Shanghai.