The bitcoin and altcoin market crashed dramatically in June. Therefore, a big event was thrown into the background. Still, it is possible for it to send massive ripple effects throughout the crypto space. It’s even the event to watch this year as it could end the crypto winter. This is the big event Ethereum Merge.
Why will the price of the leading atcoin Ethereum skyrocket?
According to IDX Digital Assets founder and CIO Ben McMillan, many refer to Ethereum’s Merge as a ‘triple halving’. Because the issuance of ETH tokens is greatly reduced. Almost 90%. McMillan explains:
The result is an economy of supply and demand that can be a very powerful price catalyst. The upcoming Merge is a very important milestone for Ethereum. It will make the system more scalable, secure and ultimately deflationary in terms of exports. This is a much needed upgrade.
Messari senior research analyst Tom Dunleavy explains why the dismissals have been cut so drastically. According to Dunleavy, this is because of the burn mechanism, which allows more Ethereum to be burned per day in transaction fees than the number of new tokens created as a reward for staking. Dunleavy says:
With proof-of-stake (PoS), you receive rewards from the network for staking and ordering transactions on the block, including transaction fee income. Some of it was burned and some allocated to validators. And if there are more transactions burned than accepted in that block, the overall supply of Ethereum drops. This is also a good thing for the price.
Merge will remove the selling pressure from miners. Naturally, this will be very positive in terms of ETH price. Ethereum miners often sell their own tokens to cover their costs. After the merger, this selling pressure will disappear. Tom Dunleavy states:
These miners sell $20 to $30 million worth of ETH every day. That’s a lot of money considering Ethereum’s market cap. You eliminate these flows when you switch from PoW to PoS.
“It is possible for Ethereum to hit $3,500 after Merge!”
McMillan says Ethereum could bounce back to $3,500 or even higher after Merge. He also adds that some of the risk appetite must return to the crypto space for this to happen. In this context, he makes the following assessment:
Much depends on the macroeconomic environment. It is possible that we are starting to see a return on appetite for risk assets among institutional investors. I think this is likely to happen in early September. I wouldn’t be surprised if you see Ethereum in the mid-$3,000s or even potentially higher.
What about Bitcoin and other altcoin projects?
“The impact of Merge will not end with Ethereum alone. Because the whole field will embrace it.” McMillan, who put forward these views, explains the reason for this as follows:
Some people point to Ethereum Merge as a potential upward price catalyst not just for Ethereum but for digital assets in general.
But as things like NFTs started to gain popularity, Ethereum’s gas fees began to climb. Other Tier-1 Blockchains have been developed to compete with Ethereum, such as Avalanche and Solana. “Ethereum is starting to lose market share to this other blockchain that prioritizes scalability over decentralization,” McMillan says.
According to Ledn co-founder and CSO Mauricio Di Bartolomeo, with Merge, Ethereum will be much more scalable. It’s also likely to start hampering competition as it will become cheaper to use. Di Bartolomeo says:
If successful, Merge will put a massive cloud on most PoS Layer-1 competing blockchains. Many compete with Ethereum on the grounds that it is faster or cheaper to use. And when Merge happens, that’s not necessarily true. It could be argued that there is no point in keeping these alternate Tier-1s any longer.
When will Bitcoin and Ethereum diverge from risky assets?
cryptocoin.com In June, the overall crypto market cap fell below $1 trillion. Many investors are trying to guess where the bottom is. He also wants to understand when Bitcoin and Ethereum might leave risky assets.
Dunleavy says that decoupling is not that far off, especially for Ethereum. And he states that Merge will play a critical role in that. “Either Bitcoin will become a full gold 2.0 store of value asset or Ethereum will become a world computer asset,” Dunleavy says. Dunleavy says this divergence for Ethereum could come with Merge. Because he only notes that Ethereum’s hodl and staking returns can be between 8% and 12%.
As such, Dunleavy argues that Ethereum will surpass Bitcoin this year and in the years to come. He also predicts that Bitcoin will eventually reach a market cap of around $12 trillion in gold. But according to him, the potential for Ethereum is much higher.
Will the leading altcoin take over other chains?
Some even believe that with Merge, Ethereum could potentially wipe out all other blockchains. Additionally, he thinks it will become the primary network in the crypto space. Paul Brody, Blockchain leader at Ernst & Young Global, says:
We don’t have a multi-OS future. We don’t have 20 different network standards. If you go back 30 years, the internet protocol was for interconnecting different types of networks. Today, there are no different types of networks. It’s just the internet. All development and engineering work takes place in the Ethereum ecosystem. Although Bitcoin seems to be doing well, I am worried about the long-term future.
The largest ecosystem tends to gain over time, according to Brody. And the leading altcoin Ethereum is the largest ecosystem. At the end of the day, Ethereum will be on top of Ethereum. Many competing Tier-1s will have to rebrand themselves as Tier-2s over the next year or two.
Serious risks remain
Despite the high optimism, there is still no guarantee that Merge will be successful, according to analysts. There is also no concrete case that it will not have negative effects that could affect Ethereum and the larger crypto space. David Duong, head of institutional research at Coinbase, comments:
The developers have now tossed the difficulty bomb back five times. But now we are in it. You see that the block times for the leading altcoin have actually increased. It’s going to be painful if we can’t do the merge.
Duong says one of the biggest risks is the pressure to do everything technically at once. “The developers of Ethereum are trying to align the terminal difficulty with the difficulty bomb itself so that they can do Merge and everything at once. This is no easy task. This has never happened before. We have never seen a Blockchain change the consensus mechanism. This is very important,” he says.
Di Bartolomeo refers to the many investors using Ethereum as collateral, and also the large number of smart contracts running on Ethereum. In this context, Merge warns of the risk of contamination if it fails. Di Bartolomeo said, “It will likely be one of the most complex technical updates a crypto protocol has ever seen. There is so much at risk,” he says.
Another thing to watch is what will happen to Ethereum miners who profit from the PoW protocol. After all, all these people have invested millions of dollars. Di Bartolomeo says:
This will create some confusion. Because all these miners will go out and try to mine different cryptocurrencies. They will not receive the same interest or income from another Blockchain. It is possible that this is also causing some fluctuations in the computer hardware.
