Ethereum on-chain data forecasts the withdrawal of 1.4M ETH over the next few days

Ethereum’s long-anticipated Shanghai and Capella upgrades were activated on April 12, and the total withdrawals in the first 40 hours following stood at 142,425 Ether (ETH), per Nansen data. This falls in line with previous estimates. 

For a brief moment on April 12, when Shapella was activated, the deposits to ETH staking contracts outpaced withdrawals. However, deposits have slowed down come April 13, while withdrawals are going strong.

ETH moved for withdrawals

Validators are required to update their staking software clients with withdrawal credentials changed to 0x01 from 0x00 and point to a valid Ethereum address. Once validators do that, partial withdrawals —i.e., withdrawals of rewards above 32 ETH — will be processed automatically.

At the time of writing, 70.1% of validators have changed to 0x01, with 407,851.20, worth over $850 million, set for withdrawal.

Additionally, 875,325 ETH (worth $1.85 billion) is waiting for full exit. Adding to the amount already processed in the first 40 hours, over 1.42 million ETH will be withdrawn from the staking contract.

ETH withdrawals will be rate limited to 1,800 validators per day, translating to a daily withdrawal of 57,600 ETH per day based on 32 ETH per validator. With 875,325 ETH waiting for full exit, it corresponds to potential daily selling pressure of between $120 million.

Validators moving to withdraw their ETH. Source: Nansen

In the first three days, when partial withdrawals will be processed as well, the total daily withdrawals will be 136,000 ETH and 173,000 ETH per day.

However, the above statistics must be taken with a grain of salt because 62.8% are forced withdrawals from the U.S.-based crypto exchange Kraken in response to a $30 million settlement with the U.S. Securities Exchange Commission to discontinue staking services.

There is a chance that a significant portion of Kraken withdrawals will move to decentralized liquid staking platforms like Lido, Frax and Rocket Pool instead of being sold on the market.

Breakdown of ETH waiting for withdrawals by entities. Source: Nansen

Interestingly, Lido accounts for 56.07% of the withdrawals processed so far, which is slightly concerning, as previous estimates suggested that withdrawals from liquid staking derivative platforms like Lido would be minimal.

Currently, 9.6 million staked ETH is in profit, which will remain most vulnerable to a sell-off. It also remains to be seen if more illiquid stakers will move to withdraw their ETH, as they represent over 34% of the 17.4 million ETH deposited in total.

Ether price analysis

Technically, the ETH/USD pair looks bullish, having broken above the $2,000 resistance level. Buyers will look to target the support and resistance levels around $2,300 and the May 2022 breakdown levels at around $2,900. Short-term support to the downside lies at around $1,725.

ETH/USD daily price chart. Source: TradingView

Related: Shapella could bring institutional investors to Ethereum despite risks

The funding rates for ETH perpetual contracts are in neutral territory, deposit the price surge, per Coinglass data. Usually, neutral positioning of the perpetual market after a major price surge means that traders are not yet excited with the present rally, which is represented by a spike in positive funding rates. It also allows more upside room for prices.

ETH perpetual futures funding rate. Source: Coinglass

However, given that there could be some spot selling pressure from the ETH withdrawals, it will likely restrict the uptrend in the market.