Ethereum Merge = Staking Unlocking? Three Reasons Ethereum Supporters Disagree

The data platform Degen Score member korpi pointed out the prevailing sentiment on Twitter that "Ethereum merger will bring about selling pressure." Some in the community believe that the merger could be a negative catalyst for the price of Ether, but korpi explains his different perspective in three points. As the author has previously publicly expressed bullish views on ETH, he believes that the unlocking will not lead to a decline in coin price, which is also within expectations. Do you agree with the reasons he provided?

This article is translated. For any doubts, please refer to the original link: https://twitter.com/korpi87/status/1528704451892023296

Summary:

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1. ETH staked will not be unlocked during the merger
2. The unlocked ETH will gradually circulate
3. Staked ETH holders are typically Hodlers

1. ETH Staked Will Not Unlock During Merge

Withdrawal feature will not be immediately activated after the merge, as the withdrawal capability is planned for another Ethereum upgrade 6-12 months post-merge.

This means that both the staked ETH and the ETH rewards obtained from staking will not be circulating in the market for a long period of time.

2. Unlocked ETH Will Circulate Slowly

When the withdrawal feature is officially launched, all staked ETH cannot be immediately unlocked. Due to the unlocking sequence mechanism, it may take several months to fully withdraw, with the longest scenario possibly exceeding a year.

To withdraw ETH, validators must be removed from the active validator set, but the number of validators that can exit in each epoch is limited.

Currently, there are 395,000 active and standby validators. Assuming no new validators join in the future, it may take 424 days for all current validators to completely withdraw.

Note: An Ethereum epoch is 6.4 minutes long, and each epoch can allow 4 to 6 validators to exit based on the number of validators. The author used this to calculate.

3. Staked ETH Holders are Typically Hodlers

Who would voluntarily lock up ETH for several months without knowing when they can withdraw? Undoubtedly, Ethereum enthusiasts.

Most ETH stakers are long-term investors who are not interested in selling ETH, especially at the current market price.

ETH stakers who prefer short-term holdings tend to opt for liquidity staking solutions like Lido Finance, allowing them to sell tokenized shares such as stETH at any time.

I examined the distribution of staked ETH through tools like Nansen and Etherscan, and found that liquidity staking only accounts for 35%.

Additionally, 30% of staked ETH comes from addresses not from exchanges or staking pools, which may belong to independent node operators.

Running a verification node independently is not easy, so these nodes are usually owned by true Ethereum believers who would not sell their ETH, right?

Overall, I don't believe that we will face significant selling pressure due to the unlocking of ETH. Unlocking will occur after a few months, the circulation will slowly increase, and many stakers will not sell their ETH regardless.