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Ether rises above $2,000 after the Shanghai upgrade, bringing year-to-date gain to more than 75%

Ethereum coin
Jakub Porzycki | NurPhoto | Getty Images

The price of ether rallied above $2,000 Thursday for the first time in eight months, after investors put uncertainty surrounding the long-awaited Shanghai upgrade behind them.

Ether advanced more than 10% to as high as $2,130.30, its highest level since May 2022. It's on pace for a 13% weekly gain. Bitcoin gained about 3% to reclaim the $30,000, rising as high as $30,928.16, its highest level since June. It's on track to finish the week up more than 9%.

After a two-year lock up period, Ethereum staking withdrawals were enabled by the Shanghai upgrade around 6:30 p.m. ET on April 12.

Investors were optimistic but cautious in the weeks leading up to Shanghai, also known as "Shapella." While many agree the upgrade is good for Ethereum in the long-term – because it allows more liquidity to ether investors and stakers which could also be a catalyst for a change in institutional participation – there was more uncertainty around how it would affect the price the week of.

Both cryptocurrencies jumped in the earlier hours of Thursday morning and got another push higher with the release of the March producer price index. It was the second report this week, following Wednesday's consumer price index, pointing to cooling inflation. They rallied higher Thursday evening.

Noelle Acheson, an economist and author of the "Crypto is Macro Now" newsletter said she's skeptical the sudden move higher in ether isn't entirely Shanghai-driven.

"It seems to be a bet on the overall liquidity outlook, but relief that Shapella did not produce a sharp drop is driving ETH's outperformance this morning," she told CNBC.

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Ether YTD

Many were initially concerned about potential sell pressure that might hit the market after Shanghai, because it would make locked ETH available for investors to withdraw. However, the withdrawal process doesn't happen instantly or overnight. Plus, much of the currently staked ETH are currently at a loss, according to CryptoQuant. Investors aren't sitting on extreme profits.

"The amount of ETH entering the market from Shanghai withdrawals is much lower than what was previously expected," said Matt Maximo, research analyst at Grayscale. "The amount of new ETH being staked is also outpacing the withdrawals, which is creating added buy pressure to offset the withdrawn ETH."

Thursday's gains brings the year-to-date comeback for ether to 75%.

Additionally, the U.S. Dollar Index, which has an inverse relationship with cryptocurrencies, fell Thursday morning to its lowest level since early February.

"ETH is outperforming BTC here because it has quite a lot of catching up to do and traders, seeing that there was no adverse reaction to last night's upgrade, are now feeling more confident about coming back in," she said.

Bitcoin is up 84% so far in 2023.

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