Why You Need to Be Excited For The Ethereum Merge
The financial markets around the world are collapsing and there is a consensus that more pain is on the way. Turning our attention towards the crypto markets; they have also seen great pain over the summer. In combination with having to deal with the macro situation, crypto has also had an onslaught of other black swan events to deal with. The collapse of Luna and UST went to nearly zero. Which would begin a domino effect that would eventually lead to Celsius, 3AC, Voyager, Vauld, and many other companies becoming insolvent. Quite frankly, it has been a very bleak market to keep up to date with daily. I am strongly of the opinion that the prices we are currently seeing will be considered once-in-a-lifetime buying opportunities in the not-so-far future. But, not everyone can keep hope during times when it seems like prices do nothing but go down each day. Finding new lows. Becoming excited when prices move up to points that we would have been terrified of it reaching only weeks ago. People in the crypto market have been looking for hope and something to be excited about.
Thankfully, there is one such event coming soon. You may have already guessed what I'm referring to, the Ethereum merge. In the entire history of cryptocurrency, there have been many important events, updates, and developments. There have been only two main events that will be remembered forever. The first is the creation of Bitcoin and the genesis block being mined. The second is the creation of Ethereum. The Ethereum merge from being a Proof-of-Work blockchain into a Proof-of-Stake chain is widely regarded as the third major milestone in the history of crypto. To say that there is extreme hype for this merge would be an understatement. Things will never be the same. Years later when we look back on the biggest developments in crypto. We will likely think of it before the Ethereum merge, and after.
But will it live up to the hype? And what will happen to the price afterward?
The first thing that you need to know about the Ethereum merge is that it isn't the complete 2.0 protocol update that we have been reading about for years. It is only the first step of that update, but arguably the most difficult as well. This means that the chain will not become faster, and transaction fees will be nearly the same. People who aren't aware of this might feel disappointed. But, there is a lot happening behind the scenes and preparing ETH for the future to be excited about.
Will it be a buy the rumor, sell the news type of event?
This is a theory that we keep seeing all over the internet and there is great validity in asking this question. In the crypto market, this is something that happens time after time. Think back to the hype of the US futures-based Bitcoin ETF. Which pumped before its release, only to end up being the exact moment the bull market ended. This also happens all the time with protocol updates, so why wouldn't it also happen this time? I will use that dangerous question that we should never say. "Is this time different?"
The answer to that question is that it very well could be. The first reason for this is because there has been an extreme amount of doubt on whether Ethereum would actually be able to successfully update their protocol. Theories that the update could actually break Ethereum. If the merge is successful, that will remove one of the largest potential FUDs towards Ethereum and cause a giant sigh of relief across the market. After all, if Ethereum would crash and burn, it would drag the entire market down with it. Therefore, if the merge is successful, I believe it won't be a sell-the-news type of event. Instead, the market will react in a bullish manner.
But, there is more.
After the merge, the new issuance of Ethereum will drop by nearly 90%. By many Ethereum enthusiasts, this has been nicknamed the "triple halvening." A reference to Bitcoin's halving. Every four years the Bitcoin halving takes place and it is theorized that this is the catalyst for the start of each new bull cycle. A few months after BTC's halving, its price begins to rocket up and the entire market moves up with it. But this Ethereum issuance drop is actually equal to 3 Bitcoin halvings. That alone should get the wheels in your brain to begin moving. But once again, there is more. While the previous two factors could arguably be enough to prevent a sell-the-news type of event. Causing the price of Ethereum to drop after the merge. There is something else that happens that will make most people want to hold onto their ETH. The rewards earned for staking your Ethereum are expected to nearly double after the merge. Currently, depending on where you stake your ETH, rewards can be around 3-5%. After the move it is likely those rewards could go up to 6-10%. Making it a great opportunity to make a passive income with one of the blue-chip cryptocurrencies.
Some people are worried that once the two chains merge into one, everyone who has been locked into the staking protocol will try to sell. But, that is impossible. As it stands, those who are staking their ETH will still have their funds locked. Unable to withdraw until a future protocol update is released. Even then, the withdrawal from staking will be a staggered release which should help to prevent a stampede rush out of staking. Once again, that high staking interest rate will be enough to keep most people wanting to stake. Another key point of FUD around the merge are the rumored forks that will be created. As far as I'm concerned, these forks are a complete nothing-burger and don't have any hope of success. With that said, I will gladly accept the forks and swap them for either more ETH or BTC.
So with all of that said, what will happen to the price of ETH leading up to the merge, and after the merge?
This is a very difficult question. Not because of the uncertainty surrounding Ethereum or the cryptocurrency market, but mainly due to outside macro forces. If we lived during normal times, I believe ETH would pump greatly before and after the merge. Reaching a new all-time high price and potentially restarting the bull market. Unfortunately, we are not living during normal times. And so the initial effect of the merge will be numbed down, but it will be felt over the long-term. Leading up to the merge I do see the price of Ethereum increasing, and also increasing further if the merge is successful. I see the price rising to the $2,000-$2,500 range. Once again, that movement could be blocked out due to the macro situation. One key thing to consider is that the Ethereum merge may potentially be the only thing propping up the prices in the crypto market. Preventing a complete collapse downwards. One thing is for certain. This is an event that many of us have been waiting several years for and I couldn't be more excited to see it happen.
How about you? What do you think will happen to Ethereum's price after the merge?
As always, thank you for reading!
