Following Ethereum's transition to PoS, validators' funds placed in a deposit contract remain staked. The combined volume currently exceeds 16 million ETH or $22.5 billion, which equates to 13% of the coin's total supply.

Shanghai, Ethereum's hardfork in March will remove limits, something that could cause some validators to want to sell off their ETH. Right now, 72% of their coins are 'underwater', i.e., suffering unrealised losses. Most validators expected the coin's value to rise after it transitioned to PoS, but those hopes have not materialised.

The chart below shows that Ethereum and Bitcoin's exchange rate difference has remained at the same level since June 2021, although Ethereum was leading in the previous 18 months because of the DeFi and NFT sectors' development.

The loss of momentum stemmed from increased competition in those sectors, but the trend changed after Terra (LUNA) collapsed in May 2022. Ethereum's share has increased from 50% to 60% from then, as it remains the most trusted one among blockchains supporting smart contracts according to community evaluations.

The renewed interest in Ethereum could have caused the altcoin to strengthen against Bitcoin. However, it didn't gain a leg up for several reasons, including the significant contraction of the NFT and DeFi sectors in 2022, as well as regulators' close attention to Ethereum due to its transition to PoS and the network's increased centralisation. 

Now, the risk of a significant increase in supply after coins become unlocked is added to these negative aspects. On the day of the 'merge', whales from the top 10% (miners and crypto exchanges are excluded from subaccounts) transferred 3 million ETH to exchanges to sell reserves, which prevented bullish movement from solidifying. In March, 16 million ETH will be unlocked. If one-fifth of validators decide to get rid of coins, the hardfork will once again fail to meet investors' expectations.

StormGain Analytics Team 
(a cryptocurrency trading, exchange and storage platform)