How Will Shapella Upgrade Impact Ethereum Price in Coming Weeks?

The world is abuzz with the upcoming Shapella upgrade, also known as Ethereum 2.0. This is the first major update in recent times to the Ethereum blockchain, the second-largest cryptocurrency by market capitalization.

The upgrade, which is due on April 12, may change the Ethereum network drastically. Some of these changes include improved functionality, scalability, and sustainability.

Let’s explore how the Shapella upgrade will impact Ethereum price in the coming weeks, for the short and the long term.

Shapella Upgrade: What You Need to Know?

Ethereum is making a game-changing transition from a Proof of Work (PoW) mechanism to a Proof of Stake (PoS) consensus mechanism. The main purpose behind this significant transition is to make Ethereum more efficient and sustainable. The transition to PoS will help reduce the energy consumption associated with Ethereum mining.

The Shapella upgrade is a positive step towards addressing some of Ethereum’s scalability and sustainability issues. The transition will make Ethereum a lot more attractive platform for developers as well as users.

Key Features of Shapella Upgrade

The introduction of Ethereum Improvement Proposal (EIP) 1559 is by far the most significant feature of the Shapella upgrade. It aims to change the transaction fee mechanism.

Ethereum’s current transaction fee mechanism involves a bidding process by users, which can lead to a higher fee during peak demand.

The EIP 1559 proposes a base fee that is removed from circulation, instead of being paid to miners, which is likely to decrease transaction fees, making the network more user-friendly.

The introduction of EIP 1559 can prove to be a double-edged sword for Ethereum. It will not only decrease transaction fees but will also increase demand for Ether, which in turn could elevate its price over time. However, on the flip side, transaction fee burning might cut down the miner’s revenues, affecting their incentives to continue mining and securing the network. This might expose Ethereum’s network to several security and scalability threats, thereby affecting its growth potential.

Moreover, the Shapella upgrade will also enhance the sustainability and functionality of the Ethereum network with new features like account abstraction and state rent.

Short-Term Ethereum Price Potential

The Shapella upgrade has the potential to create a frenzy and excitement among crypto enthusiasts about Ethereum. This could potentially drive up the ETH price in the near term. On the other hand, potential disruptions and risks can’t be written off at this stage. They could lead Ethereum to short-term price fluctuation and volatility.

Long-Term Ethereum Price Potential

A successful Shapella upgrade will open new vistas of opportunities for Ethereum in the long run. If the upgrade successfully covers the sustainability and scalability issues, it would certainly make the network a lot more attractive for users and developers alike. It could also result in wider adoption and increased demand for Ethereum in the long run.

ALSO READ: Regulators in Alabama, Texas, and Montana Label YieldTrust.ai as a Ponzi Scheme

All Eyes on April 12, 2023

It’s April 12, 2023, when Ethereum will execute the much-hyped Shapella upgrade. The actual impact of this upgrade on the Ethereum price will depend on multiple factors. They include how well the upgrade is implemented, adopted, and received by the Ethereum community and the broader cryptocurrency market.

ALSO READ: UAE To Create The First World Crypto Freezone

Final Word

The Shapella upgrade has the potential to impact the price of Ethereum positively and negatively in both the near and long term. If Ethereum upgrade results in improved scalability, sustainability, and functionality, it will have a positive impact on its price.

However, nobody can write off short-term volatility uncertainty in the short term at this stage. All eyes are now on Ethereum for its much-awaited Shapella upgrade on April 12. It will not only affect Ethereum but will also have an impact on the cryptocurrencies that operate on the Ethereum network.