Ether has rallied over the past week as investors look to the next big technology upgrade to the Ethereum network. The second-largest crypto asset by market cap hasn’t had the kind of rally that led to the shift from proof-of-work to proof-of-stake protocols in September. It added more than 4% this week, outperforming bitcoin, which gained less than 1%, and the major stock indexes. It rose 12% in March, though it was fueled by a variety of forces that pushed Bitcoin up 22%. Last year it rallied in the weeks leading up to the upgrade. ETH gained 70% in July alone. It dropped by about 20% immediately after the upgrade was complete. The upcoming change, known as the “Shanghai” upgrade and more recently the “Shapella” upgrade, is set to take place on April 12 and will allow investors to withdraw staked Ether from the network for the first time. This is meant to strengthen Ethereum’s proof-of-stake consensus mechanism, which it migrated to in September’s “Merge” event, which will ultimately allow more liquidity for Ether investors and stakers. “The upgrades represent a significant step forward for the Ethereum network, and it’s hard to say what ETH flows might look like post-upgrade, given greater liquidity all else being equal,” said KeyBank analyst Alex Markgraf. “Greater liquidity can be a catalyst for change in institutional participation while simultaneously presenting commercial opportunities for providers.” It’s also meant to extend the migration that took place in September, meaning it should make the network faster, more scalable and more energy efficient than a working protocol. “This upgrade is a significant milestone in Ethereum’s transition to proof-of-stake,” said Andrew Ballinger, head of staking solutions at Canadian investment fund manager 3iQ. “The liquidity that comes with this will allow greater participation in staking and thereby increase network security.” ETH.CM= 1M Mountain Ether (ETH) Here’s what investors need to know about the next Ethereum update: Your ‘locked up’ ETH is being withdrawn as the merge turns Ethereum into a proof-of-stake network and gives investors even bigger earning opportunities By passively yielding to their ETH holdings through staking — which involves locking tokens up in the network for a set period of time — Shapella will make it possible for investors to “unstake” or withdraw their ETH. “Until this point, staked assets were locked up indefinitely, and those who wanted to participate in the network and generate yield on their ETH holdings often had to get comfortable with an indefinite time frame for liquidity,” Ballinger explained. There are several reasons why someone might want to unstake their funds at any point in time. Investors who want to connect to other parts of the network, such as buying NFTs or participating in decentralized finance protocols, may be unable to keep their funds locked up. Some held their ETH before the advent of liquid staking protocols, Bollinger noted. Owen Lau, an analyst at Oppenheimer, noted that short-term traders may want to simply unstake their ETH to sell — especially at times like now, when crypto prices, including Ether, are rising. However, he added, they are more likely to get bigger returns by keeping their funds locked up. (When you share your crypto, you contribute to the proof-of-stake system that keeps decentralized networks like Ethereum running and secure; you become a “validator” on the blockchain, meaning you verify and process transactions as they arrive , if selected by the algorithm. The lock-up of your funds acts as a type of collateral that can be destroyed if you act dishonestly or fraudulently as a validator. To learn more, see our staking primer here.) “Liquidity for stocked ETH will allow a significant group of institutions and traders, who have been sitting on the sidelines, the ability to finally participate in the network,” Bollinger said. Markets that will have a wave of negative selling pressure as funds previously locked in Ethereum are released.Data from CryptoQuant suggests that any selling pressure will subside. Typically, selling pressure occurs when market participants are sitting on extreme gains. Currently, however, the majority of ETH (54%, or 9.7 million ETH) is currently at a loss, the firm said. Average depositors of the largest staking pools are also currently at a loss, according to the data. Ballinger mentions that the update won’t unlock even on day 1. Participants can take up to 30-60 days to exit due to a two-day “unbonding” period (the amount of time a blockchain representative waits before moving or selling their tokens) and a dynamic exit queue that changes. Based on the number of participants in line, he said. “With a limited number of participants exiting in one day, this selling pressure will not be as immediate or violent as advertised by some commentators,” he said. “We may still see some selling pressure in the price of ETH, but that will come in a few weeks – a much healthier resolution for the Ethereum network.”