How Will Ethereum Merge Affect The Markets?

How Will Ethereum Merge Affect The Markets?

Cryptocurrency enthusiasts have heard about the Ethereum Merge. It has been discussed for years. It seems we know the launch date. The developers set the upgrade of the Mainnet at the block number 58750000000000000000000000000000000000000000000. With every second, the date the block generated is more precise. 

After the block, Ethereum will start functioning with a brand new consensus mechanism. Instead of miners using their computing power to secure the network and earn their proof-of-work fee, the blockchain will run with tokens locked up in validating nodes.

The most significant Ethereum upgrade in history will likely happen on September 15 or 16. Some experts and analysts call the upcoming event the most crucial moment in cryptocurrency history. What will the change mean for the ETH owners, and how will it affect the crypto prices? 

It has been a while since the core ETH developers decided that the blockchain should move from the original proof-of-work (PoW) consensus protocol to the proof-of-stake solution (PoS). The PoS protocol has been used for years in many crypto projects, including some of the most successful Ethereum spin-offs such as Cardano or Polkadot.

On September 15, the gigantic project is going to be finalized. The existing ETH Mainnet will join with the Beacon Chain, a proof-of-stake consensus layer. The move should immediately give more scalability, security, and energy efficiency to all ETH-based projects that adopt the newest version of Ethereum. It's going to be revolutionary. All transactions using Ethereum should become much faster and more economical. The developers estimate that the PoS consensus will reduce the energy consumption by Ethereum by 99.95%.

Currently, environmental and energy consumption issues are the main arguments from cryptocurrency critics in general. Some point out that a single Ethereum transaction can consume as much electricity as a US household in more than a week. Traditional Bitcoin may generate even more. 

Jonathan MacDonald, chief marketing officer of decentralized blockchain protocol Minima, told GOBankingRates that a single Ethereum transaction could consume as much power as an average U.S. household uses in more than a week. Bitcoin’s energy consumption is even worse.

Will the technical revolution attract new investors to ETH and Ethereum-based projects? Ethereum has been battling Bitcoin for the leading cryptocurrency. BTC stays faithful to the original PoW protocol invented by Satoshi Nakamoto. Bitcoin will seek improvement of its scalability through second-layer solutions such as Lightning Network. 

At the moment, BTC's market capitalization is around $406 billion, while ETH is worth less than 50% of this, $191.2 billion. However, the change will affect many other projects built around Ethereum. This includes the top two stablecoins - Tether and USD Coin. The projects have been launched on Ethereum, and although USDT has moved almost half of its tokens to the more efficient Tron network, that's also based on the Proof-of-Stake protocol. The Merge may not only reverse the trend of abandoning Ethereum solutions but speed up the adoption. 

Since mid-July, the ETHBTC price has risen from 0.053 to 0.073. This run would not be possible without the positive advances of the Merge project. A smooth, successful transition to PoS may lead to a strong run of ETH. But on the other hand, investors should be aware that such a scenario might have already been included in the price, and the "buy rumors, sell facts" strategy may be advantageous in this case. 

Analysts agree that there's a non-zero probability that a successful Merge would lead to ETH becoming the no. 1 market capitalization cryptocurrency. This would revolutionize the market and community. Bitcoin is the first and one of the most romantic decentralized money, while ETH is widely adopted by companies developing their blockchain projects, including traditional banks. 

Going away from PoW may reduce the ETHs inflation by diminishing the issuance of the money. Some analysts suggest that the ETH may become deflationary money, which could be a game changer for the ETH price. 

Ethereum co-founder Vitalik Buterin points out that the Merge we are waiting for is just 55% of the foreseen upgrade roadmap of upcoming improvements to scalability, utility, and cybersecurity of the network.

Traders who believe in the future of Ethereum may consider the recent ETHUSD drop by 21% as a discount and buy low opportunity. The token is trading below $1,600. Crypto bears would see a further crash in early September. 

With investing apps like SimpleFX, you can benefit from the changing cryptocurrency prices. They aim to help their users profit if the ETHUSD goes up or down. SimpleFX allows users to invest ETH, BTC, USDT, and other cryptocurrencies in stock market, commodities, and more. You can also stake your ETH, earn interest on your capital, and use it for trading at the same time.

Trade accordingly to your knowledge and intuition, but don't miss out on the most critical event in crypto. These are going to be exciting weeks for the market.

Image provided by SimpleFX

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