While Ethereum (ETH) co-founder Vitalik Buterin stages a Twitter battle with Michael Saylor over the Microsoft founder’s Bitcoin (BTC) purist stance, he has other important crypto matters on his agenda to worry about. Most notably, the upcoming Ethereum 2.0 merge or what’s also known simply as the Merge.
According to recent news, the Merge is the long-awaited ETH blockchain upgrade or Ethereum 2.0. Along with it, the network should be expected to go from a “Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism.” What this translates into is that the ETH blockchain will no longer be subject to mining, as in the case of BTC. It also means the true price, or transaction validation, will be revealed after the ETH upgrade goes live.
A September 19, 2022, Target Date
It’s no exaggeration to say that the Merge has been a long time coming. Even then, when it is finally given the green light on September 19, 2022, it’s said that the complete transition to a blockchain PoS will not yet be complete, making some investors anxious about a highly anticipated Ethereum price spike. The true Merge is expected to happen between the Beacon Chain and the ETH mainnet, or so sources say.
However, Vitalik is quick to toss some cold water on these price predictions. During a recent interview, the robotic-appearing Ethereum wizard predicted the anticipated Merge would not change the price of ETH immediately after it goes live. He also added that Merge’s impact won’t be limited to market sentiment but instead to other aspects driven by both psychology and narrative.
However, with ETH having been outperforming even BTC in this latest bear market, it’s safe to say that the old adage, buy the rumor, sell the news applies when it comes to Ethereum 2.0. But investors will just have to wait and see what transpires in August and if another delay is to be expected.
Not a Complete Transition
While the Merge between the Beacon and ETH blockchain is expected to finally happen, the complete, 100 percent transition to PoS will not yet take place. This alone could affect the price once things go live. Experts say that there are still specific “market expectations” that will coincide with the September launch date. Investors are counting on an ETH price spike as soon as Merge/Ethereum 2.0 goes live.
But it’s also being said that the ETH rally won’t actually become fact until half a year or more later. This is due to what’s called the “post-cleanup fork,” which is said to take an average of seven months to complete. Once that takes place, ETH developers should be willing to accommodate withdrawals. At the same time, an offering of a post-cleanup state ETH would occur.
It should also be noted that a major reduction in the Ethereum supply will occur in the wake of the Merge. This comes about from an EIP-1559 proposal which allows for the burning of ETH instead of issuing the tokens to existing miners. The idea behind this is to make ETH deflationary.
How Merge Will Affect Ethereum Price
During Buterin’s recent speech at the ETH Community Conference, he stated that investors should expect “fluctuations” in ETH’s price going forward. It should, however, increase given the right crypto market conditions. Many analysts believe there will be an ETH spike prior to the Merge and then a dip after the fact. Again, buy the rumor, sell the news.
Staked ETH is expected to remain locked after the Merge while ETH developers busy themselves with a post-cleanup renewal. Popular exchanges like Coinbase and Kraken are said to be allowing the trading of staked Ethereum a half year beyond the post-cleanup period.
Say the experts, the overall trend for Ethereum Classic (ETC) and Lido Staked Ethereum (stETH) is said to be expanding into positive territory. The prices of these digital assets are presently increasing in proportion to the present price of ETC (around U.S.$1,600 per ETH as of his writing).
However, ETH is down almost 42 percent over the past three-month period. Yet, ETC, stETH, and ETH are on the move again and even beating out BTC in terms of market popularity with recent price increases of 22 percent, 11 percent, and 12 percent, respectively.
Is now a good time to purchase ETH for your portfolio? While you should always do your own research and/or consult with a professional financial advisor, it might not be a bad idea to begin aggressively dollar cost averaging (DCA) into ETH in preparation for the Merge.
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