3 Truths Most People Miss about the ETH Unlock at the Merge

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"ETH will dump hard when >12M staked ETH get unlocked after the Merge." I've noticed some people consider the Merge as a negative price catalyst due to a supposed huge ETH unlock. This is wrong. Here is what they miss about the $ETH unlock. 🧵👇

TL;DR: 1. Staked ETH won't be unlocked at the Merge 2. Unlocked ETH will be released slowly 3. Staked ETH is often a never-sell stack Read on for more details.

1. Staked ETH won't be unlocked at the Merge The Merge won't enable withdrawals. This is planned for another Ethereum upgrade which may take place 6-12 months after the Merge. In other words, both staked $ETH and staking rewards will not enter the circulation for a long time.

2. Unlocked ETH will be released slowly Even when withdrawals are enabled, all staked $ETH won't be immediately available. There will be an exit queue which may take more than a year in the worst case scenario or several months in a more realistic one. Release will be slow.

To withdraw $ETH, a validator must exit the active validator set but there is a limit to how many validators can exit per epoch. There are currently 395k validators (active + pending). If no new ones are set up (highly unlikely), it will take 424 days for all of them to exit.

3. Staked ETH is often a never-sell stack Who would voluntarily lock $ETH for many months, not knowing when withdrawals will be even possible? ETH maxis, no doubt. 😉 Most ETH stakers are long-term investors. They are not interested in selling, especially not at current prices.

Short-term-oriented $ETH stakers would rather use liquid staking options (e.g. @LidoFinance) which allow them to sell their tokenized stake at any time. I used @nansen_ai and @Etherscan to check the distribution of staked ETH by the staking type: liquid staking is only 35%.

Moreover, 30% of staked $ETH comes from addresses not labelled as exchanges or staking pools. It may represent individually-ran validators. Running a validator is not hassle-free, therefore, it's often done only by the true ETH believers. They won't be selling, will they?

Summing up, I don't believe we will experience any inflated dumping due to $ETH unlock. It will take place in many months, will be slowly released and many stakers won't be selling anyhow. My bullish view is intact. ETH will melt faces after the Merge. twitter.com/korpi87/status/1513459657381068812