The highly anticipated Shanghai upgrade of Ethereum, also known as the Shanghai-Capella hardfork, will take place Wednesday. Users then have access to $31 billion in ether ( ETH) that has been staked on the blockchain since December 2020.

It has been widely hailed as a long-term bullish upgrade for Ethereum’s native coin. Still, bitcoin ( ) is outperforming the wider crypto market and becoming more dominant with each upgrade.

According to TradingView data, Bitcoin’s dominance rate (which measures the largest cryptocurrency’s market share) rose to 48.5% on Tuesday. This is the highest level since July 2021. This metric has increased by 15% in the past year.

Ether’s dominance remains static between 19% to 20%. This compares to a 21% increase from 14% just weeks prior to the merge software upgrade in September last year. This technological overhaul replaced Ethereum’s energy-intensive proof of work mechanism for verifying transactions using a proof–of-stake system. It also set the stage to create Shanghai. To increase the security of the network and verify transactions, you can stake by depositing coins into the blockchain. In return for rewards.

Investor caution regarding pricing ether ahead Shanghai comes from several factors. These include concerns that tokens will not be unlocked after the upgrade and regulatory issues.

“The Shanghai upgrade will allow over 18 million Ethereum staked since the end of 2020. According to Griffin Ardern (a volatility trader at Blofin crypto asset-management company Blofin), the market is concerned that the unlocking could cause a sell-off and create uncertainty in the market.

Bitcoin continues to grow in market share, while ether stagnates. (TradingView) (TradingView)

The upgrade unlocks more than 18,000,000 ETH. However, partial withdrawals up to 1.1 million Ethereum – which are the coins earned through staking rewards – will not be available immediately.

Recent statements by analysts have indicated that partial withdrawals could take many days to complete and that there is likely to be significant selling pressure.

In a Friday note, Lucas Outumuro, Head of Research at IntoTheBlock wrote that if all partial withdrawals were attempted immediately after the Shapella Fork (which seems highly unlikely), it would take approximately four and a quarter days for these ETH profits into the market.

Outumuro claims that full withdrawals of the majority of the ETH staked may take longer.

If validators tried to exit simultaneously, it would take around 100 days. This could translate into $80-$100M in ETH being withdrawn each day. Outumuro stated that this would represent 1% of ETH trading volume per day, but it is unlikely that all withdrawals are sold.

However, the market isn’t convinced by ether’s performance relative to bitcoin or ether put options. Or bearish bets that draw higher prices then call options.

Investors are also likely to be affected by regulatory concerns. The U.S. Securities and Exchange Commission claimed in February that Ethereum staking services offered through centralized exchanges amounts to selling unregistered securities within the U.S.

“ETH is subject to higher regulatory risks. “ETH faces relatively higher regulatory risks,” Ardern stated. Ardern was referring to the Commodity Futures Trading Commission (the U.S. agency that regulates futures markets).

Bitcoin has been benefited by recent instability in the U.S. banking sector and the sharp decline in interest-rate expectations worldwide. In the last three years, cryptocurrency has been evolving as a macro asset and has a history of drawing safe haven bids during financial crises.

After several failed U.S. banks in March, BTC regained the store-of value narrative. BTC’s dominance has increased since then,” Ritika Malik, a Dubai-based crypto analyst trader and trader, said. Malik stated that the dominance rate has reached a “multiyear resistance”, which has capped the upside in past. This means that ether and other coins could soon surpass bitcoin.

She said that the market was ‘pricing up’ any selling pressures it is likely to experience from the Shanghai hard fork, and that the upgrade could become a “buy-the-news” event. “The BTC dominance chart is also at a multiyear resistance, as we speak. All the stars align for a rotation to ETH.

Edited and approved by Sheldon Reback.