3 reasons why the price of Ethereum will increase with the merge

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 effects of the cryptocurrency crash. Coinbase recently laid off 1,180 employees, almost a fifth of its workforce. Other cryptocurrency platforms, such as Gemini, Crypto.com, BlockFi, Bitpanda and OpenSea, have followed suit, reducing their workforce by 5-20% or announcing a hiring freeze.

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

What is the merge?

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

What does this mean for ordinary mortals? Currently, Ethereum is mined by proof of work, which means that you need very powerful and power-hungry computers to mine Ethereum. The merger will move Ethereum towards proof-of-stake, meaning Ethereum owners stake their coins to validate transactions and power the network.

With this upgrade, Ethereum will become significantly greener. Ethereum’s energy consumption will be reduced by 99.95% and it will use much less carbon to be more secure. As part of proof-of-stake, Ethereum is secured by validators who stake their coins on behalf of miners.

What will be the impact on the price of Ethereum?

Although cryptocurrencies can 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. In the case of proof-of-stake, people with the most cryptocurrencies get the most rewards. People will be incentivized to accumulate and hold as much Ethereum as possible.

Increased efficiency and scalability

Unlike bitcoin, Ethereum serves as both a decentralized currency and a storage of computer code that can be used to power contracts and financial applications. The merger will, in theory, make Ethereum more efficient and faster. Processing times will be shortened, especially during peak network usage. Therefore, 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 put into play, the more rewards you earn. This, combined with the new deflationary nature of the Fusion, 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 lose.

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3 reasons why the price of Ethereum will increase with the merge


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