Coinbase Expects Flood Of ETH Withdrawals After Shanghai Upgrade

Ethereum holders who staked their Ethereum during the Merge may soon be able to un-stake and access their funds. In a recent tweet, Coinbase revealed that un-staking requests made on its platform might take several weeks or months for the protocol to process.

The announcement came as Coinbase anticipates a surge of staking withdrawal requests after the Ethereum network’s upcoming Shanghai upgrade. The next month’s upgrade will allow stakers to access their staked ETH.

No More Indefinite Lockup Period For Staked Ethereum

The Ethereum Merge, which occurred in September 2022, saw Ethereum transition from a proof-of-work to a proof-of-stake consensus mechanism. However, despite the transition, the holdings of stakers were locked up in the Beacon chain.

As a result, staking providers such as Coinbase created a temporary situation where users could stake ETH on their platform but could not withdraw the funds. By mid-April, the Shapella upgrade of Ethereum should occur, barring any hindrances, allowing users to withdraw their staked ETH.

This upgrade will also permit ETH holders to stake more, but there would be no indefinite lockup period. Meanwhile, Coinbase clarified that staking requests are handled on-chain.

Hence, the exchange’s function is to act as a channel for delivering un-staked ETH to users once the protocol authorizes its release. According to Coinbase:

“Un-staking requests will become available to all Coinbase customers simultaneously and will be transmitted to the Ethereum protocol. We shall place the requests in a queue based on when they are received.”

After the upgrade, the exchange said users could request to un-stake their funds from their Coinbase profile. According to reports, the un-staking option would be available 24 hours after the upgrade.

Coinbase Offers Liquid Staking Alternative 

However, Coinbase advised customers to prepare for a significant wait time after submitting the request. Due to a lack of control over the un-staking process, Coinbase could not give customers a precise timeframe.

To mitigate any inconvenience caused by this delay, Coinbase offers a liquid staking alternative called “cbETH.” This derivative of staked ETH on the platform allows stakers to trade ETH while it remains locked up effectively.

Meanwhile, the relative value of Ethereum compared to Bitcoin has hit its lowest point in 5 months. Despite Ethereum’s Merge upgrade on September 15th, 2022, the past six months have been disappointing regarding ETH’s price performance.

The altcoin traded below the $1,500 mark for several months before breaking past the resistance. In fact, between September 15th, 2022, and March 15th, 2023, Ethereum underperformed against Bitcoin by 10%.

Since October 2022, the ETH/BTC price ratio has remained at 0.068 as its support level. However, data shows that the ratio breached the support level on March 15th, dipping further.

Although the cause of this underperformance is uncertain, ETH futures and options data indicate that traders are currently hesitant and do not have confidence in the market.