Ethereum upgrade to unlock over US$30B in crypto tokens

In this photo illustration, a woman's silhouette holds a smartphone with the Ethereum logo in the background. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

The software that underpins the second-biggest crypto coin ether is due for a software upgrade on Wednesday that will give investors access to more than US$30 billion of the digital tokens.

Known as Shapella, the latest upgrade to the Ethereum blockchain will enable investors to redeem an offshoot of ether tokens that they have deposited in return for interest on the blockchain network over the past three years.

Such so-called "staked ether" tokens currently account for about 15 per cent of all ether tokens, according to data firm Dune Analytics, and are worth some US$31 billion.

The upgrade is due for around 5.30 p.m. ET (10.30 p.m. GMT) , according to a tweet by Tim Beiko of the Ethereum Foundation, a body that speaks for the Ethereum network.

The changes will likely lead to heightened volatility for ether, investors have predicted.

Some believe that widespread redemptions could lead to a wave of selling, in turn weighing on the price of ether, whose market value of about US$230 billion is topped only by bitcoin.

"The release of this previously unrealised investment may lead to significant downward price pressure if it is immediately liquidated," Deutsche Bank analysts said in a note.

In its last significant upgrade, Ethereum in September drastically reduced its energy usage - a move proponents said would give Ethereum an advantage as it seeks to surpass bitcoin.

But ether has continued to lag its larger rival, gaining just under 60 per cent this year versus a more than 80 per cent jump for bitcoin.

After trillions of dollars were wiped from the crypto market in a bruising 2022, the sector has rallied in 2023 on expectations that central bank interest rate hikes are slowing.

Ethereum has grown popular in so-called decentralised finance applications, which offer financial services while avoiding traditional industry gatekeepers such as banks.

It remains, however, little used in mainstream commerce or finance.

(Reporting by Tom Wilson in London; editing by Jason Neely)