Ethereum experiences boost as Zhejiang testnet goes live
Feb. 1 marked a crucial milestone for ethereum (ETH) developers as a new test network, Zhejiang, launched. What is it and how it works?
The Zhejiang update allows users to get a head start in testing the protocol’s next major upgrade, Shanghai hard fork, which will go live in March this year.
Ethereum Improvement Proposal-4895, or staked ether withdrawals, proposed as part of the upcoming Shanghai upgrade, will allow users to withdraw their staked ether assets and rewards.
After the success of the Ethereum Merge upgrade in September 2022, users were able to stake their ETH on the proof-of-stake (PoS) network. Yet, their funds remain locked until the patch goes live.
Creating a testnet duplicating the main blockchain allows developers and users to test upgrades and applications in a low-stakes environment before going live.
However, the new testnet doesn’t allow users to test any withdrawal features. They will come six days later with the Shanghai and Capella testnet updates, though users can still practice depositing to validators and get a sense of how the user interface will function.
How will Shanghai impact various stakeholders?
The Ethereum community has long been awaiting the ability to withdraw staked ether – and now, with the upcoming Shanghai hard fork, their wishes may finally come true.
With 16,341,257 ETH currently staked on the Beacon Chain, representing nearly 14% of the total circulating supply, the Shanghai hard fork will have a major impact on the cryptocurrency ecosystem.
In 2022, JPMorgan predicted that Coinbase could capitalize on the upcoming updates, potentially earning an additional $225 million to $545 million in annual revenue. Moreover, the improved liquidity of ETH staking should increase demand for ETH, as users will be able to stake directly with ethereum.
This could drive up the price of ETH, as the improved staking and liquidity conditions create a more favorable market equilibrium.
With the potential to influence ETH’s value, the Zhejiang testsnet will be closely monitored – as billions of dollars are expected to be managed from the ETH staking activity.
What affects the ethereum price
The crypto market got some welcome news along with the Zhejiang testnet as the Federal Reserve (Fed), in its Feb. 1 meeting, gave a quarter percentage point increase to the key short-term interest rate from 4.5% to 4.75%, the highest in decades.
This move, which was expected by the market, was done to slow down the record-high inflation that had been taking a toll on the value of stocks, equities, and crypto assets.
“I think for the first time, we can now say that the disinflationary process has started.”Fed Chairman Jeremy Powell
Ethereum reacted quite positively to the announcement – shooting up from $1,566 to $1,689 within a couple of hours. ETH is trading at $1,666, a 5.62% increase from 24 hours earlier.
Crypto markets forecast
The rise of cryptocurrencies such as ether has been a source of fascination – and confusion – for many.
However, recent economic shifts in the US and global markets have highlighted the correlation between ETH prices and traditional markets.
In the wake of monetary moves and economic changes from the Federal Reserve, ETH and other cryptos have experienced a bullish momentum. This trend is expected to continue in the coming months.
What is clear is that the world of cryptocurrencies has greater relevance than ever before, and the global financial markets are beginning to take note.
With the United States economy strongly influenced by the performance of the Federal Reserve, the potential for ETH to impact macroeconomic conditions is notable.
Furthermore, analysis suggests that the current ETH-related “hype” is creating an environment of buoyancy and could result in further appreciation over the long term.
The future of crypto markets continues to be uncertain, but it is clearly becoming increasingly integrated into the global economic landscape.
With ETH prices increasingly connected to traditional markets, it is now more important than ever to keep an eye on the shifting relationship between crypto prices and the world economy.