The merge is one of the most hotly anticipated events in the history of Ethereum and has garnered widespread interest. When the merge is finally complete, the main part of Ethereum’s roadmap will have been completed, and the work that Vitalik has been doing over the past few years will finally have been rewarded with completion.
Ethereum to become deflationary
After the introduction of EIP-1559, Ethereum became a far more attractive asset to hold in terms of stock to flow, since a large chunk of transaction fees were being burned rather than being distributed to miners.
This is expected to be a catalyst for huge price rises in Ethereum going forward, since it means that ETH will be far more deflationary than before, and at peak times it may even be net deflationary – this is certainly the expectation after ETH 2.0 goes live within a few days, after which point there will be further introductions to limit Ethereum’s inflation.
ETH to $2,200?
A lot of hope and expectations have been building given the news of the merge, and many have come to believe that the worst of the bear market is behind us.
However, most people underestimate how sustained a bear market can be and underestimate the market’s ability to be perpetually pessimistic.
There are some who are calling for ETH to rally to $2,200 going into the merge. This would bring ETH back a level only slightly more than 50% down from ATHs and would likely cause a much larger rally in alt coins.
However, the broader markets don’t look so bullish: the stock markets are currently in a recession (despite governments trying to change the definition of “recession”) and crises in commodities markets tend to be extremely problematic for an economy, with consequences that could be felt for years, or even decades.
Could the merge be a “sell the news” event?
The merge is an event that the Ethereum community has been anticipating for years now. The transition from proof of work to proof of stake is a significant one, and the ramifications for the decision are that the second largest blockchain by market capitalisation will no longer use proof of work.
However, the merge itself will do very little to help boost scaling (something many investors appear not to have understood properly); fees are likely to continue to rise and transaction speeds aren’t going to get any faster.
As with the Coinbase IPO marking the top of the Bitcoin market in 2021, the merge is an event that could quite feasibly trigger a “sell the news event”.
As people come to realise that the merge doesn’t change user experience in a significantly positive way, the environmental arguments were overblown (there are huge environmental benefits to proof of work), proof of stake is haram, and the decision to move to proof of stake is one that calls into question Ethereum’s immutability and centralisation risks, Ethereum will be forced to contend with a media furore like never before.
Once the merge is complete and poorly informed investors (of which there are many) come to realise that Ethereum can do the same things other chains can do but more slowly (and still with centralisation as a risk), they may be inclined to explore other Turing complete blockchains such as Avalanche, whose technology allows for the blockchain to be extremely scalable and yet maintain a relatively high degree of decentralisation.
In the short term, it is entirely plausible that Ethereum rallies to $2,200, but given the regulatory uncertainty that plagues the industry,
- Ethereum Bellatrix is Live, Next Stop is Paris – Merge On Track for 13th to 15th Sept
- Ethereum Merge Will Attract Institutions and Create Staking Boom, Chainalysis Reports
- Ethereum Price Booster – Merge Benefits Will include Crypto Deflation
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