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Better backdrop after Shapella

Assessing ETH performance after Ethereum’s latest upgrade, and a proposed partnership between Chainlink and GMX

April 14, 2023

Better backdrop after Shapella

At a glance

Ethereum’s successful Shapella upgrade supported better than expected price action for ETH, which we believe could continue in the short-term – possibly through the end of April.

Key takeaways

  • Ether’s strength is partly due to its relative underperformance to bitcoin year-to-date, but it helps that the macro environment remains conducive to risk taking for the time being. Plus, it’s important to parse what the on-chain data is telling us.
  • Meanwhile, we discuss the proposed partnership between Chainlink and GMX which would make GMX the exclusive launch environment for Chainlink’s new low-latency oracle services, in return for a percentage of the fees earned by the perpetual swap exchange.

Written by

  • David Duong, CFA, Head of Institutional Research
  • Brian Cubellis, Research Analyst

Market View

In line with our expectations, ETH price action has been resilient following the Shanghai (Shapella) Fork on April 12. Within the first 24 hours of withdrawals being enabled, ETH supply entering the market has been relatively limited for several reasons:

  • First, the majority of addresses receiving partial withdrawals have not spent their received rewards with around 70% of addresses now having properly set their withdrawal credential prefixes to 0x01. (Or more accurately, some addresses were not able to set their withdrawal credentials until the upgrade went live, and this is necessary for both partial and full withdrawals to be enabled and funds unlocked.)
  • Second, full withdrawals (i.e. exits) are being processed but their market impact has been partly offset by a healthy number of new entrants in the validator entry queue.

A breakdown of the validator exit queue indicates that Kraken has so far represented over two-thirds of all exit initiations. This had been anticipated following its settlement with the SEC in February that required the winding down of its staking business. The amount of effective staked ETH on the network has fallen from 18.2M prior to the upgrade to 17.9M or 14.9% of circulating ETH supply. As we publish, there are more than 24k validators waiting to exit representing almost 875k ETH of potential unlocked supply, according to Nansen (although Rated has the count at 21k validators). As exits are rate limited to 1800 validators per day at the moment, that would take about 14 days to unlock.

Another reason why ETH is appreciating is that ether’s relative underperformance to bitcoin year-to-date (particularly post US banking turmoil as evident in the ETH/BTC cross trailing behind the 50d moving average since mid-March) has also left a lot of room for catchup post-Shanghai. Consequently, we have seen some rotation from BTC into ETH. Meanwhile, the macro environment remains conducive to risk taking for the time being. Although core CPI is still sticky (rising at a pace of 5.6% YoY), PPI data for March was dovish while Fed staff is projecting a mild recession later this year (as described in the FOMC minutes). That supports arguments that the end of the hiking cycle may come as early as May and could keep market sentiment buoyant through the end of April, in our view.

Chart 1: ETH/BTC cross has been trading under 50d MA since US bank turmoil

ETH/BTC cross has been trading under 50d MA since US bank turmoil

Separately, we saw the equivalent of around 31.2k ETH ($62.5M) withdrawn from the liquid staked ETH sector following the Shanghai Fork. Lido’s stETH and Coinbase’s cbETH – two of the largest liquid staking tokens - are still trading at around a 1% discount to ETH, although ​​we haven’t seen any relevant imbalances in major liquidity pools. While these gaps have narrowed recently, we would have expected the discounts to close after the upgrade. The disparity may partly reflect residual uncertainty in the overall timeline of the ETH withdrawal process.

Finally, as of now, it’s unclear when the Cancun Fork - the next major upgrade for Ethereum - will materialize as there is no scope for what it will definitively include other than EIP-4844 (proto-danksharding). Proto-danksharding is a precursor to full danksharding and will support higher throughput for the network by enabling a new data type (“blobs”) as well as data availability sampling.


GMX & Chainlink. The Arbitrum-based protocol GMX, which primarily serves as a permissionless, on-chain perpetual swap exchange, recently announced a potential partnership with the decentralized oracle network, Chainlink. As we discussed in a weekly commentary in December, GMX is the most widely used application on Arbitrum and currently accounts for ~25% of the network’s ~US$2.3B of TVL. The proposal suggests that GMX would become the exclusive launch partner for Chainlink’s forthcoming low-latency oracle services in return for 1.2% of all fees generated by the GMX protocol (for context, GMX has generated ~US$191M in fees since inception in September 2021). 

Chainlink’s new solution has been designed specifically with DeFi derivative applications in mind and promises to enable a more efficient trading environment on GMX by meaningfully reducing latency, opportunities for MEV, and overall gas usage. From Chainlink’s perspective, the economic terms of the partnership represent an attractive potential revenue source for the protocol going forward. It’s worth noting that this proposal is still under consideration by the GMX community and has not yet been formally approved.

Crypto & Traditional Overview

(as of 4pm EST, April 13)



Mkt Cap

24 hour change

7 day change

BTC correlation



















Gold (Spot)






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Coinbase Exchange & CES Insights

Volumes on exchange remained steady this week as the market focused on the Ethereum Shapella upgrade. Coinbase Institutional has seen flows in both BTC and ETH skewed to the buy side. In client conversations, even those that have caught a good portion of the rally remark that they feel under-allocated. Such positioning could lead to an extension of the rally as traders reluctantly pay higher prices. Altcoins remain out of favor and net for sale. Regulatory fears, a possible recession looming, and poor momentum are some of the reasons traders are reducing exposure. 

Nearly all institutional client segments were net buyers over the past week including traditional hedge funds, crypto native hedge funds, and traditional asset managers. Miners sold at their typical pace.

coinbase exchange volume chart 4.13.23
pie chart of most traded coins on coinbase exchange 4.13.23

Financing Rates



CeFi Min

CeFi Max







USD - 1m




USD - 6m











Notable Crypto News


  • Tokenization And The Future Of Finance: Unleashing The Power Of Blockchain In Global Markets (Forbes)
  • MicroStrategy's $4 billion bitcoin bet in the green as price hits $30,000 (The Block)


  • The U.S. Is Losing Its Edge in Crypto, Says Andreessen Horowitz (Decrypt)
  • Crypto regulation by enforcement is 'really, really bad,' says Binance CEO (The Block)


  • Trading-focused blockchain Sei raises $30M, bringing valuation up to $800M (TechCrunch)
  • Reddit Just Dropped Thousands More NFTs on Polygon From Over 100 Artists (Decrypt)
  • Twitter taps eToro to let users trade in stocks, crypto (Reuters)


  • Navigating Tax Season with Coinbase: A Guide to Crypto Tax Reporting (Coinbase Blog)

View From Around the World


Hong Kong’s Securities and Futures Commission said during a speech at the Web3 Festival in Hong Kong that “as long as DeFi activity falls within the scope of the Securities and Futures Ordinance (SFO), it will be subject to the same regulatory requirements as traditional financial activity” according to CoinDesk. Thus automated trading of virtual assets on a DeFi platform will require the platform and operators to have a Type 7 license. (CoinDesk)

According to Bloomberg, Hong Kong’s biggest virtual bank, ZA Bank, is expanding into transfers of crypto and fiat currencies. The bank will “act as a settlement bank for clients to allow withdrawals in Hong Kong, China and US currencies after they deposit crypto tokens with exchanges.” ZA Bank is already working with HashKey and OSL, and will look to work with other exchanges as they become listed. (Bloomberg)

The Week Ahead

Apr 17

Apr 18

Apr 19

Apr 20

Apr 21

Notable Macro

US Housing Starts

US Initial Jobless Claims

Notable Earnings

Bank of America


Goldman Sachs


Morgan Stanley


HNT Solana Migration


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