Ethereum, the second largest cryptocurrency in the market, launched the Shapella (Shanghai + Capella) upgrade this Wednesday (12) allowing investors to withdraw their coins that had been locked since migrating to Proof-of-Stake (PoS).
While traders were nervous about the update as a large amount of ETH could be dumped into the market, the digital currency was up 6% and broke above $2,000 for the first time this year.
With a capitalization of BRL 1.2 trillion, Ethereum accounts for 19.3% of the cryptocurrency market capitalization. That is, although it is half the size of Bitcoin, its rise should also have a positive effect on the sector.
Why did Ethereum go up with the Shapella update?
Despite the possibility that the market could fall in the near term, which did not happen, the Shapella update was eagerly awaited by investors. After all, even a former developer of the project criticized the constant delays.
Overall, the update was positive as investors can now stake their ethers (ETH) on the network and unlock them whenever they see fit. That is, analysts point out that this will generate more demand for ETH as they can earn additional coins while holding, driving up the price.
The $2,000 break, a price not seen since August 2022, is also an important milestone for both Ethereum itself and the rest of the market. After all, with BRL 1.2 trillion in market cap, its rise could even help Bitcoin continue its bull run.
However, it is important to note that ETH did not hold more than $2,000 over three days last year. That is, despite the breakup, the battle is not yet over.

Ethereum inflation remains negative
Besides staking, generating some sort of dividend for its investors, another point to be observed by investors is Ethereum’s negative inflation.
While ETH suffered an inflation rate of 9.7% per annum with Proof-of-Work, this figure is now negative in Proof-of-Stake, with a projection of -0.22% per annum. The image below shows this difference, also mentioning Bitcoin, currently with an annual inflation rate of 1.7%.

Finally, despite appearing to be a more solid investment than Bitcoin, it is worth remembering that it is precisely because of these constant changes in its monetary policy that Ethereum is heavily criticized.
After all, while BTC sticks to its original roadmap from 2009, ETH has undergone several random changes since launch and this shouldn’t be the last. These are therefore points for attention when investing.
Source: Live Coins

Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.