Ethereum (ETH) price reached a daily time-frame $4,078 mark on Mar. 13, up 15% for the month, but events surrounding the Dencun upgrade threaten to scuttle the rally.
The Ethereum ecosystem is a rife with expectations of positive network effects from its latest network upgrade event. Amid the widely-bullish speculations, on-chain analysis provides in-depth insights into how key ETH stakeholders are positioned behind-the-scenes.
After a successful testnet deployment in on Jan. 30, Ethereum developers are set to execute the Dencun hard fork on Mar. 13.
Media buzz, and analyst opinions surrounding the vital network event has been largely positive, however, last-minute on-chain movements observed among ETH node validators in the build-up raises concerns.
The Ethereum beacon chain presents real-time data on the total deposits, withdrawals and the number of individual nodes dedicated to validating transactions on the network.
The latest data at press time on Mar. 13 shows that 2,450 node validators exited the Ethereum staking network within the last 48 hours, withdrawing 78,016 ETH (~$320 million) ahead of the Dencun upgrade.
Rapid staking withdrawals could mean early signs of impending bearish price action for a number of reasons. Firstly, for any Proof of Stake (PoS) network. Lesser coins means lower security and it increases the risk of network blips amid euphoric market activities.
With the total staking deposit currently above 31.3 million ETH, the 78,016 ETH withdrawals recorded between Mar. 11 and Mar. 13 will likely not cause any discernible frailties in operational processes.
However, the rapid withdrawals mean that the node validators have now effectively increased the market supply by approximately $320 million within the last 48 hours leading to the Dencun upgrade date.
ETH exchange deposits hits 40-day peak ahead of Dencun upgrade
The prospects of Ethereum node validators flooding the markets with their fresh 78,016 ETH withdrawals threatens to dilute market supply.
In affirmation of this stance, on-chain data culled from leading blockchain analytics platform Santiment, shows that ETH node validators withdrawal coincided with unusual spikes in exchange deposits.
On Mar. 11, investors deposited 62,096 ETH into crypto exchanges and trading platforms, just as the node validators withdrawal frenzy began.
Historically, an increase in exchange deposits is often a precursor to bearish price action as it means more coins available to be readily traded.
Without a commensurate increase in demand, over $320 million worth of staking withdrawals flooding the markets could put downward pressure on ETH prices in days ahead.