Merge arrived, saw and defeated. You wouldn’t guess it from the price of crypto.
It was the Ethereum blockchain’s massive upgrade was officially launched on Sept. 15th, moving it to a more energy-efficient “proof of stake” (PoS) system without any hiccup.
Despite the fact that expectations of this event led to ether rising by around 15% from the lows of June however, it has since dropped to 19%, sunk alongside bitcoin as well as other risky assets due to investors’ resentment over inflation and central bank policy.
Yet, a lot of market players are optimistic about the future potential of Ethereum and its own cryptocurrency.
“Previously, we have talked to sovereign wealth funds and central banks to help build their digital asset allocations… but direct investment has been voted down due to energy concerns,” said Markus Thielen, chief investment officer of the asset administrator IDEG Limited.
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“With Ethereum moving to PoS, this clearly solves this last pillar of concern.”
A few crypto investors are paying attention to the next event that may change the market.
The next major update for Ethereum is called the “Shanghai”, expected by market participants in about the end of June that will aim to reduce the high cost of transactions.
It would permit validators, who have put cryptocurrency tokens called ether on the blockchain for a yield, take their staked coins out, to keep or trade.
There’s much to be concerned about: more than $20 billion in ether deposits are currently locked according to data service provider Glassnode.
The crypto coin ether that has been staked is seen as an investment on Ethereum’s long-term performance, as it isn’t redeemable until Shanghai occurs and is trading close to the same level as ether, at 0.989 Ethereum, as per CoinMarketCap data, which indicates that there is confidence in the future improvements.
The coin dropped to as to 0.92 at the end of June.
PURGE AND SPLURGE
Beyond Shanghai There are many additional upgrades are being scheduled for Ethereum the company whose is co-founded by Vitalik Buterin has nicknamed “the surge”, “verge”, “purge” and “splurge”.
The focus of future updates is likely to be the ability of the blockchain to perform more transactions.
“Because the Merge was delayed for several years, investors, traders, and end-users have a great deal of trepidation around when Ethereum will meaningfully scale,” said Alex Thorn, head of the firmwide research department at the blockchain-focused bank Galaxy Digital.
Paul Brody, global blockchain head at EY Paul Brody, EY’s global blockchain leader, stated: “Ethereum’s future needs to, and will, scale to hundreds of millions of transactions a day.”
ETHEREUM KILLERS
The primary objective of the Merge was to cut down on Ethereum’s energy use since cryptocurrencies are under scrutiny due to their huge carbon footprint. The energy consumption of the blockchain was reduced by around 99.95 percent according to the Merge’s developers and could be a entice to large institutional investors who were previously restricted by environmental governance, social and (ESG) issues.
The Merge and the upcoming updates also diminish the attraction of investing in so-called “Ethereum killer” blockchains like Solana and Polkadot According to Adam Struck, CEO of the venture capital firm Struck Crypto.
But institutions aren’t leaping into the fray yet, since an unforgiving macro environment can chill the risk appetite.
The longer-term transition to PoS is anticipated to reduce the frequency that ether tokens are issued – possibly by as high as 90%, which could increase prices.
Related: 18 “uncomfortable” realities of non-fungible tokens
Furthermore, annual yields of 4.1 percent when staking Ether tokens to authenticate transactions may be appealing to investors.
Although the proof-ofstake method is able to provide the lucrative returns, many crypto enthusiasts argue that it shifts Ethereum far from being a strictly decentralized model , as the largest validated parties could have greater power in the operation of the Blockchain.
At present however the Ethereum world may be advised to relish it’s Merge moment.
“There may be volatility in the days to come,” analysts from Kaiko Research. “But for now the community can take a well-earned victory lap.”