The crypto community is counting the hours for the Ethereum Merge upgrade. Investors’ focus is on how the asset and overall digital currency industry will respond to the transition to the Proof-of-Stake (PoS) protocol. It is also a matter of curiosity how the price of ETH will react and whether the transition will be smooth.
Ethereum Merge is coming
ETH developers successfully complete checklists for releases and upgrades. So far, Ethereum Merge progress is 99.76% complete. Also, almost 85% of the nodes in the Ether network are compatible with the latest client versions. Merge will go live on September 15, with the network’s hashrate falling below 872 TH/s. With Merge, Mainnet (execution layer) and Beacon Chain (consensus layer) will merge. As a result of this merger, the Ether network will switch from PoW to PoS.
On September 6, the Bellatrix upgrade in the consensus tier prepared the Beacon Chain for Merge. Also, the Paris upgrade in the execution layer will prepare the Mainnet for Merge. This will be triggered by the terminal total difficulty (TTD) which will reach 587500000000000000000 on September 15th. About 13 minutes after the Paris upgrade, Ethereum will switch to PoS.
What will Merge Ether bring to its network?
Merge marks the end of PoW and renders Ethereum miners dysfunctional. However, Ethereum’s energy consumption will decrease by 99.95%. Most Ethereum mining pools have already started supporting ETC mining as Ethereum moves to PoS. cryptocoin.comAs we have reported, ETC, an Ether fork, continues to use the PoW mechanism.
The move to PoS will improve the Ether network in areas such as scalability, accessibility and energy use. As miners are replaced by validators, the supply of ETH will also decrease. Accordingly, as the amount of ETH staked increases, the circulating supply of Ether will also decrease. This comes with Ether’s burning policy that has been going on since 2020. Accordingly, the altcoin will put itself in a better position in terms of price and yield by reducing its supply.
Will switching to PoS lead to lower gas fees?
Ethereum’s transition to PoS will not replace the expensive gas fees of the network. According to Ethereum, L1 and L2 scaling solutions will continue to be used to make transactions on the network cheaper. Accordingly, Merge will continue to support layer-2 altcoins such as Polygon and Optimism.
State before Ethereum Merge
BuyUcoin also recorded a surge in Ethereum-related transactions. He said that there was a great enthusiasm among investors because of Merge. According to the platform, the emergence of an impressive increase in ETH trading is extremely positive for the transition to PoS. Many analysts consider the upgrade the most important blockchain event of recent years. It seems that despite global inflation, Merge remains a hope in the crypto space for now.
In 2022, a huge drop appeared in the cryptocurrency markets. Therefore, the year was quite difficult for Ether. ETH price has lost 11 consecutive weeks from April to mid-June amid tightening monetary conditions globally, the collapse of the Terra ecosystem and the bankruptcy of several crypto-native firms. On June 18, 2022, ETH hit an 18-month low of $879. However, in September, the number of news about Merge began to increase. This hype also affected the price, with Ether hitting around $1,725 on September 9.
What could go wrong with Merge?
Marcus Sotiriou, an analyst at GlobalBlock, pointed out that there are several risks that could come to the fore in Merge’s early stages. Accordingly, there are some key challenges that are likely to arise after the transition. Foremost among these is the possibility that users will not be able to process the new chain because the software is new. However, the upgrade may also fail. In such a case, it is possible for the system to stop itself and this will trigger a huge selling pressure. However, for now, let’s say that everything is going as planned.
What are the expectations for Ethereum (ETH) price?
There is a possibility of problems during the merge. But the long-term returns are huge next to the short-term problems. There are innovations such as reduction in energy use, speed, staking and deflationary currency. However, there are banks that have announced that they will support ETH staking. As such, the analyst suggests that with Merge, Ether will see an increase in institutional inflows. Now let’s take a look at the expectations of analysts.
“We can see pump and dump”
Crypto analyst Tradersweekly warns that with Merge, we may see a rise in ETH price, followed by a sharp decline. Meanwhile, Antoni Trenchev, co-founder of crypto lending platform Nexo, states that investors should not expect an automatic rally in Ethereum, as Merge’s initial success will impact price action. Interestingly, FTX CEO Sam Bankman-Fried predicts volatility in the early stages of Merge. According to Bankman-Fried:
“Like all major transitions, I think it’s going to be a little rocky at first. I think when this happens it’s going to be a messy activity around. I think this is inevitable both in the long term and in the medium term.”
“A downward price action is imminent”
Crypto analyst Big Cheds believes Ethereum Merge is a “buy the rumor, sell the news” event. As the ETH price surged above $1750, some profit bookings were seen. According to him, if the price drops below $1700, it will trigger the shorts. Other analysts are also expecting a bearish move as ETH loses momentum.
“It will close the year at this level”
As of September 13, 2022, CoinCodex was pessimistic in its short-term Merge-based ETH price prediction. The analyst said that he expects ETH to drop to $1,572.61 by September 18, 2022. He then predicted that it would potentially reach $1,528.47 by October 14. LongForecast, however, was more optimistic in its forecast. He saw ETH close the year at $2,339.
