The crypto market still does not seem to have really reacted to the ethereum merger, but there are many comments circulating on the net. There has been some volatility in the price of ETH today, but nothing that has taken it out of the range of the last three days. However, according to the CEO and co-founder of the Swell Network, Daniel Diaz, the ‘Merge Trade’ has actually just started. The market may only price in the successful Merger in the coming days due to macroeconomic developments such as Federal Reserve monetary policy. According to Dizon, from a fundamental point of view, nothing would really change for ETH, because the merger is a technological change that has to do with the ecosystem and the network, energy efficiency, decentralization and growth. These are things that over time could further strengthen the positioning of Ethereum as a dominant layer 1 blockchain, while what matters financially for ETH is that it is becoming a potentially deflationary cryptocurrency. This should add structural upward pressure on prices in the long run, so much so that Dizon states:
“We believe that it will not be long before marginalized capital continues to deploy capital back into ETH.”
One should not be surprised, then, that the impact of the Merger on the price of ETH in the short term has not been there, because instead it may be there in the long term.
The Ethereum merger affects the entire ecosystem
Focusing specifically on the technological aspect, Luno’s Vice President of Corporate Development and Global Expansion, vijay ayyarpoints out that the Ethereum PoS move is also a huge confirmation that the technology works, so much so that it could pave the way for the growth of many more networks based on PoS. It also paves the way to a more Ethereum ecosystem. efficient and scalable in the long term, with a more sustainable network from an environmental point of view. He stated:
“The merger could help improve the way cryptocurrencies are viewed and attract institutional and retail investors. This allows Ether to become a deflationary asset, this will also reduce the inflation of your net coin supply to zero or less. Additionally, most new blockchains are already embracing PoS-based consensus and this will only increase.”
There are, however, those who go beyond these considerations, venturing even broader assumptions. CoinSpot’s head of marketing, Ray Browndoes so, arguing that the merger could also lead to the development of more global interest in Web3 projects, as Ethereum is responsible for creating smart contracts that power various crypto initiatives, DeFi Y NFT. In fact, “given the anticipated higher efficiency of the network, this will provide a strong foundation for future innovative projects.” Thus, the impact of the Merge may not be limited to the technological aspects of the ethereum networkbut it can even promote the jump from Web 2.0 to Web3, thanks to what can be re-invented on this network from now on.
The long-term impact of Merge on the Ethereum ecosystem
The risks of the new update of the Ethereum network
However, not everyone is optimistic. According to some, there would be more security problems and more risk for investors. Although it must be emphasized that the criticisms coming from the bitcoin world they are far from impartial, the technical criticisms cannot simply be brushed aside. The risk is that PoS can make the Ethereum network less secure. However, there are widely divergent views on this hypothesis because, on the one hand, there are those who argue that to date PoS networks in general have proven to be less secure than PoW networks, while on the other hand, there are those who argue that PoW favors the centralization of mining. In fact, there have been several PoS networks that have had serious problems, even recently, while on the other hand, Bitcoin, for example, has not shown any security problems for many years. One question also concerns the possible PoW hard fork of Ethereum that would create a new duplicate network, but apparently this risk seems to remain decidedly low for now. It is worth noting that Ethereum offers very high rewards to those who find bugs, which bodes well.
The impact on Bitcoin (BTC)
There are also those who argue that the merger could also have an impact on the value of Bitcoin. The hypothesis is that, thanks to the move to PoS, Ethereum can become dominant over Bitcoin, but in reality this is a hypothesis that has been circulating for years and has not even come close to becoming a reality yet. The fact that, as is speculated, with PoS Ethereum may become more popular does not at all mean that Bitcoin will become less popular. On the contrary, now that they are also completely different technologically, each could go their own way without stepping on each other’s toes.
The merger makes Ethereum decidedly greener
eToro Crypto Market Analyst, simon peters, remember that the Ethereum Foundation estimated a reduction in Ethereum’s annual energy consumption from about 112 terawatt-hours to just 0.1, or more than 99.9%. Peters comments on this figure saying:
“This is of particular importance in the current global macroeconomic circumstances, where energy prices are high and emission reductions are desirable.”
This could be one Ethereum’s long-term advantage over Bitcoin, but probably not for the specific use that is now being made of BTC in the global financial markets. However, it is estimated that with the introduction of PoS that eliminates mining and thus the need to create new ETH to reward miners handsomely, the issuance of new ETH could reach 90%, which would make ETH was much less inflationary than it is now. To this should also be added the burning part of the canons.
The influence on the value of ETH
Also interesting is the fact that the more ETH participation increases, the more they withdraw from the markets, which effectively creates a decrease in supply. ETH could therefore also become deflationary, although this is currently just a hypothesis. On the other hand, in the short term, CryptoQuant notes that net ETH deposits on exchanges are currently higher than they were last week, and in general, higher deposits correlate with an increase in supply and thus the selling pressure. Therefore, there are no certainties, except that the short-term trend is quite different from the long-term trend. Macro events certainly continue to heavily affect the crypto markets, and perhaps it is these, rather than the Meltdown, that are currently having an impact on prices. As the months go by, however, things could change, but it’s still too early to tell.
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