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SA crypto exchanges upbeat after R543bn Ethereum upgrade

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 14 Apr 2023

South African crypto exchanges are optimistic about this week’s upgrade of Ethereum (ETH), the world’s second most popular digital currency after Bitcoin.

This, after the software that underpins the second-biggest crypto coin was upgraded on Wednesday in a process called the “Merge”.

The Ethereum Merge is the joining of Ethereum’s proof-of-stake Beacon Chain with the Ethereum Mainnet to transition the Ethereum blockchain off the legacy proof-of-work system.

The event gives Ethereum investors access to more than $30 billion (R543 billion) of the digital tokens.

While some of the exchanges ITWeb spoke to say they are seeing an uptick in Ethereum trading on their platforms since the upgrade, some say it’s still too early to tell, and they are taking a cautious approach to the development.

Proof-of-stake switch

Christo de Wit, Luno country manager for South Africa, says the Shanghai upgrade, as the latest upgrade is known, was the most anticipated Ethereum upgrade since the Merge last year, also known as the Paris upgrade, when the network completed its switch from proof-of-work to proof-of-stake.

De Wit explains that Shanghai will allow stakers, also referred to as validators, to unstake funds that have been locked since work started on this switch in December 2020.

“Ahead of the upgrade, analysts were looking at how many stakers would withdraw their Ethereum. Specifically, how many of these stakers would withdraw their rewards earned versus how many withdraw rewards and the base amount staked.

“With uncertainty around locked coins no longer an issue, they also wondered how many new investors would stake Ethereum,” he says.

David Porter, GM of AltCoinTrader, says up until now, “validators on the Ethereum network weren’t able to withdraw their staked Ethereum, of which a minimum of 32 ETH was required in order to run your own validator”.

According to Porter, this is not an insignificant amount of capital to have tied up and equates to over R1 million at today’s prices.

“With the latest upgrade, users can now ‘unstake’ their ETH for the first time since December 2020.”

Says Farzam Ehsani, CEO and co-founder of VALR: “The funds that were staked to ensure the integrity of the blockchain which were previously locked up are now available to be withdrawn and certain other optimisations to the network were included in the upgrade.”

Crypto confidence

Asked about the local market’s reaction to the Merge, De Wit says the Shanghai upgrade was triggered on 12 April at 22:27 UTC, which was just after midnight in South Africa.

“At this stage it is too early to definitively comment on the reaction of South African investors. In anticipation of the upgrade, there was a lot of excitement in the crypto community, as the upgrade would conclude the Ethereum blockchain’s migration to a full proof-of-stake consensus mechanism.”

While it’s too early to tell, De Wit points out that according to beaconcha.in, roughly half an hour after the Shanghai upgrade was activated, about $10 million worth of ETH had been processed.

“We have seen that the price of Ethereum has remained stable and risen slightly in the immediate period after the upgrade, which could signal confidence in the network and the upgrade.”

Porter says AltCoinTrader is seeing a small uptick in the volumes of Ethereum traded on its platform since the event. Like investors elsewhere, local crypto investors have been cautiously optimistic about this upgrade, he notes.

“It’s obviously an important milestone on the Ethereum roadmap, but there was a fear that unlocking 18 million ETH for withdrawal (about 16% of the total supply) may lead to some sell-side pressures on the market.

“However, this fear appears to have been largely unfounded. Personally, I think that investors know the value and, of course, the potential future value of their ETH and are not simply rushing to unstake their ETH now that they can.

“We think this may just be borne from the positive market sentiment generally and perhaps the sense that ‘another successful Ethereum upgrade’ has been completed. In short, I don’t think the upgrade itself has led to increased trading volumes.”

Likewise, Ehsani says VALR has seen an increase in ETH transactions.

“South African and global investors have received the news of the successful upgrade in a very positive light. Ethereum is trading 9% higher in the last 24 hours at the time of my response.”

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