$320M worth of ETH inundates the market as validators make a move
The price of Ethereum (ETH) on March 13 reached a daily high of $4,078, marking a 15% increase for the month. However, concerns have arisen due to the upcoming Dencun upgrade, which could potentially disrupt the rally.
The Ethereum ecosystem is anticipating positive network effects from the upcoming network upgrade. While there is widespread optimism, on-chain analysis provides detailed insights into the positioning of key ETH stakeholders.
Ahead of the Dencun hard fork, Ethereum node validators have been withdrawing ETH from the market. After a successful testnet deployment on January 30, developers are now preparing for the upgrade on March 13. However, the last-minute withdrawals by node validators have raised concerns.
The Ethereum beacon chain provides real-time data on deposits, withdrawals, and the number of nodes dedicated to validating transactions on the network. The latest data shows that 2,450 node validators have exited the Ethereum staking network within the last 48 hours, withdrawing 78,016 ETH (approximately $320 million) ahead of the Dencun upgrade.
The rapid withdrawals could potentially indicate bearish price action for several reasons. Firstly, for any Proof of Stake (PoS) network, a decrease in coins leads to lower security and increased risk of network issues during market activities.
Although the total staking deposit is currently over 31.3 million ETH, the recent withdrawals are unlikely to significantly impact operational processes. However, the rapid increase in market supply due to the withdrawals could dilute market supply and potentially affect ETH prices.
This concern is supported by on-chain data from Santiment, a leading blockchain analytics platform, which shows that the withdrawal of ETH by node validators coincided with an unusual spike in exchange deposits. On March 11, investors deposited 62,096 ETH into crypto exchanges and trading platforms, coinciding with the beginning of the node validators’ withdrawal frenzy.
Historically, an increase in exchange deposits has been a precursor to bearish price action, as it indicates a higher availability of coins for trading. Without a corresponding increase in demand, the influx of over $320 million worth of staking withdrawals into the market could put downward pressure on ETH prices in the coming days.
