Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.

Nansen, a blockchain analytics firm, published a report on Monday addressing one of the principal fears raised by Ethereum’s monumental Merge event expected this week: that a significant number of so-called “stakers” could cause a major sell-off of ether (ETH) the second they get the chance.

Sometime this week, if all goes according to plan, Ethereum developers will pull off the most sophisticated network upgrade in crypto’s short 13-year history. In an event called the Merge, Ethereum will port over its network security from the bank of miners that for years expended computing power to race for block rewards and transaction fees, using a system called “proof-of-work,” to a new model where ETH holders “prove” their stake in the blockchain.

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People have been able to stake ETH since the launch of the Beacon Chain in December 2020, by locking up their assets but earning rewards along the way. Some $20 billion worth of ETH has been staked to date, accounting for 11% of ether’s supply.

According to Nansen, more than 70% of all staked ETH is worth less today than when it was purchased. This is conceivably a good thing, the researchers argue, as ETH holders in the red are less likely to sell their assets into the market. Only 18% of so-called illiquid stakers (those who used a third-parties to stake) are “in profit.”

Even more to the point, ETH stakers will have to wait another six to 12 months until the so-called Shanghai upgrade before they can unlock their bags. The Ethereum Foundation has also proposed a sort of “withdrawal queue” meant to prevent a mass sell-off.

Nansen again crunched the numbers and found that if all current ETH stakers want to sell their holdings, the queue would extend for 300 days.

While a mass sell-off of staked ETH is improbable, there’s still the chance that people who bought ETH recently specifically to trade on the headline-making event will sell after the Merge is completed. Buy the rumor, sell the news.

See also: Sell the Ethereum Merge | Opinion

Nansen’s research found other concerning details. Just five entities account for over 64% of all staked ether. Of those, three are exchanges – Coinbase (COIN), Kraken and Binance – accounting for 30% of staked ETH. Lido, an open financial platform run by a decentralized autonomous organization (DAO), holds the largest share of 31% of staked ETH.

This sort of concentration raises serious concerns about Ethereum’s “credible neutrality,” and the chance that base-layer transactions could be censored. And that’s not purely theoretical: Following the U.S. Treasury Department’s sanction of Tornado Cash that effectively banned all U.S. users from touching the service, Ethereum validators will need to determine whether they blacklist wallets associated with that protocol.

It’s the type of problem that doesn’t have a technical fix.

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Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.

Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.