3 Reasons Why Ethereum Price Will Rise With Upcoming Merger

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How will the merger impact Ethereum prices?


Key points

  • Ethereum, the second-largest digital currency, is radically changing how it works with the upcoming merger, potentially the biggest event for crypto this year.
  • The merger will move Ethereum from proof-of-work to proof-of-stake, making it more environmentally friendly and scalable.
  • This upgrade may lead to wider adoption of Ethereum and reduce supply, potentially increasing the price of Ethereum.

It was a brutal year for cryptocurrencies, with $2 trillion, or nearly two-thirds of the crypto market, wiped out. Cryptos themselves have not only been hit hard. Many crypto funds and platforms have also gone bankrupt. Crypto lender Celsius, hedge fund Three Arrows Capital (3AC), and Voyager Digital, another popular lending platform, filed for bankruptcy in the past two months.

Employees have also felt the sting of the crypto meltdown. Coinbase recently laid off 1,180 employees, almost a fifth of its workforce. Other crypto platforms such as Gemini, Crypto.com, BlockFi, Bitpanda and OpenSea have followed suit, cutting their workforce by 5-20% or announcing a hiring freeze.

It’s not all bad news. Ethereum, the second largest digital currency, is radically changing how it works, becoming greener and scalable. Known as Merge, some say it is the biggest event for crypto this year. It is currently scheduled for September 19.

What is Merger?

According to Ethereum.org, the merger is “the joining of Ethereum’s existing execution layer with its new proof-of-stake consensus layer… It eliminates the need for power-intensive mining and instead secures the network at using ETH staked. A truly exciting step in realizing Ethereum’s vision – more scalability, security and sustainability.”

So what does this mean for the average person? Currently, Ethereum is mined via proof of work, which means you need very powerful and power-intensive computers to mine Ethereum. The merger will upgrade Ethereum to proof-of-stake, which means Ethereum owners stake their coins to validate transactions and power the network.

This upgrade will allow Ethereum to become significantly greener. Ethereum’s energy consumption will be reduced by 99.95% and will use considerably less carbon to be more secure. Under proof of stake, Ethereum is secured by validators who stake their coins instead of miners.

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What impact will this have on the price of Ethereum?

Although the crypto may be volatile, the upcoming merger can potentially impact the price of Ethereum.

Proof of Stake

In proof of work, miners were incentivized to have more powerful computers to earn blockchain rewards. Under proof of stake, people with the most cryptocurrency get the most rewards. People will be incentivized to accumulate and hold as much Ethereum as possible.

Increased efficiency and scalability

Unlike Bitcoin, Ethereum is used both for a decentralized currency and for storing computer code that can be used to power contracts and financial applications. The merger will, in theory, make Ethereum more efficient and faster. This will shorten processing times, especially during peak network usage. As a result, more businesses might start using Ethereum due to its greater efficiency and scalability.

deflationary

After the merger, the number of Ethereum tokens issued could drop by 90%, according to Aaron Samsonoff, chief strategy officer and co-founder of InvestDEFY, a creator of structured crypto products. This will make Ethereum deflationary, which means the total supply of Ethereum will slowly decrease over time. This would reduce the supply of Ethereum, creating upward pressure on prices as demand increases or stays the same.

The combination of these issues can potentially have a big impact on the future price of Ethereum. The more coins you wager, the more rewards you earn. This, combined with the new deflationary nature of the merger, will reduce Ethereum’s supply. Additionally, there may be greater institutional demand for Ethereum, driving up the price as well.

Investors should do their own research before investing in cryptos. Due to its high volatility, you should only invest what you can afford to risk losing.

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