Ethereum is getting another upgrade. Markets could be disrupted-and Coinbase could benefit.

ETHUSDUSD –0.84%’s blockchain network is about to undergo an upgrade. Crypto markets may be disrupted and Coinbase Global COIN –1.87% might benefit as a result, so investors should prepare for it.

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In the coming month, Ethereum is expected to perform its “Shanghai Hard Fork,” marking the latest major upgrade to the Ether ecosystem since the “Merge” last year, which transformed it into a blockchain. 

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A fundamental upgrade was undertaken on Ethereum to change the way transactions were secured and processed from the "proof of work" system, which involves "crypto miners" that use computers to solve complex puzzles on BitcoinBTCUSD –1.01% to "proof of stake." Through proof of stake, Ether holders secure the network and validate transactions with their tokens, earning yield in the process in return. Up to 5% is currently being earned by staking Ether.

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It also made Ethereum more attractive for investors, which led to a surge in Ether prices. The transition will only be complete after the Shanghai Hard Fork in June. It will finally be possible for validators to withdraw Ether after the Shanghai upgrade. A major consequence of this is that two things are affected.

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There are several reasons why it may disrupt markets, mainly because it may put pressure on the price of Ether, a cryptocurrency widely held by traders and used for a number of purposes - for example, as collateral for loans. The logic goes that validators who have already earned yield will sell their Ether once they are able to withdraw them. 

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The number of staked Ethers currently stands at nearly $27 billion, and 1 million Ethers have been earned in yield worth $1.6 billion. It is therefore possible that there will be selling in the market that could lower prices.

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"With staked-Ether holders trapped for more than two years, some analysts are concerned that their Ether will be sold when they get the opportunity, causing Ether's token value to be impacted," analysts at JP Morgan said.

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Technical factors could prevent excessive disruption following the Shanghai upgrade-though it is impossible to predict how traders will react exactly.

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As a result of the Shanghai Fork, Worthington et al. have implemented precautions to prevent significant selling. In an explanation of how only a few withdrawal requests can be processed at one time, they added that staked-Ether will become eligible for withdrawal once the upgrade is completed.

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Secondly, the Shanghai upgrade may ignite a surge in stakes among yield-seeking investors. Ether could be acquired by traders and staked after Shanghai, which would counteract selling pressure. In addition, staking services offered by brokerage Coinbase (ticker: COIN) are expected to benefit users.

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For those interested in staking Ethereum, 32 ether, or around $52,000, is required. Smaller investors can leverage Coin base's solutions, allowing them to stake as much Ether as they want while earning a healthy fee.

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The Shanghai Fork will have an immediate impact on intermediaries like Coinbase in terms of growth in staking revenue," Worthington's team wrote. We see significant revenue potential for intermediaries like Coinbase given validators can earn up to 20% of customer staking income.

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Diversification is also a necessity for Coinbase. Due to a bear market in crypto prices, the broker has seen its stock plunge 66% in the last year, which has scared away its core retail investors. The analyst community identified staking, alongside subscriptions and a business aimed at professional investors, as options for diversifying the crypto economy.

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A price target of $60 is assigned to Coinbase by J.P. Morgan. The Price of Coinbase stock was down 6.6% on Tuesday to $69.70 amid intense volatility in recent weeks due to a "short squeeze."