© Reuters Photo file: Note tokens representing the cryptocurrency networks Bitcoin, Ethereum, Dogecoin and Ripple are submerged in water in this May 17, 2022, illustration. REUTERS/Dado Ruvic/Illustration/File Photo
By Meda Singh and Lisa Pauline Matakkal
(Reuters) – The merger came, saw and conquered. Not what you would expect from crypto prices.
Blockchain’s mega-upgrade finally went live on September 15th, moving to a more energy-intensive “proof of stake” (PoS) system with less hassle.
Although the event’s forecast showed Ether up 85% from June, it is down 19%, along with bitcoin and other risky assets hit by investors’ inflation and central bank policy.
Nevertheless, many market players are very bullish about the long-term prospects of Ethereum and its native cryptocurrencies.
“We have already talked to sovereign wealth funds and central banks to help them build their digital asset allocation…but direct investment has been rejected due to energy concerns,” said Markus Thielen, chief investment officer of IDEG Ltd.
“When Ethereum moves to PoS, this will clearly solve this last pillar of concern.”
Some crypto investors are now turning their attention to the next event that could shake up prices.
The next significant improvement for Ethereum is “Shanghai”, which is expected by market participants in six months, to reduce high transaction costs.
In exchange for profits, validators who put Ether tokens on the blockchain will be able to withdraw, hold or sell the held coins.
There’s a lot at stake: more than $20 billion in Ether reserves are currently locked up, according to data provider Glassnode.
Accumulated Ether cryptocurrency – seen as a bet on Ethereum’s long-term success as it cannot be redeemed until Shanghai happens – is trading close to 0.989 Ether against Ether, according to CoinMarketCap data, indicating confidence in future improvements.
The coin dropped to 0.92 in June.
PURGE and SPLURGE
Beyond Shanghai, several upgrades are planned for Ethereum, which co-founder Vitalik Buterin nicknamed “the chase,” “verge,” “purge” and “splurge.”
A major focus of future improvements may be on the blockchain’s ability to process multiple transactions.
“Because integration has been delayed for several years, investors, traders and end users have a lot of fear around when Ethereum will scale in a meaningful way,” said Alex Thor, head of blockchain-focused firm Galaxy Digital Research.
Paul Brodie, global blockchain leader at EY, said, “The future of Ethereum needs, and will, hundreds of millions of transactions per day.”
The main goal of the merger was to reduce Ethereum’s energy usage as cryptocurrencies come under fire for their massive carbon footprint. Blockchain’s energy consumption has been cut by roughly 99.95%, the developers say, which could tempt powerful institutional investors, previously constrained by environmental, social and governance (ESG) concerns.
The merger and future improvements will also increase the investment interest of the so-called “Ethereum killer” and , said Adam Struck, CEO of the venture capital company Struck Crypto.
However, institutional investors aren’t jumping in just yet, as a dire macro environment chills the waters of risk appetite.
Longer term, however, the switch to PoS is expected to reduce the rate at which Ether tokens are issued – potentially by as much as 90% – which should increase prices.
Additionally, the annual 4.1% yield for storing Ether tokens to confirm transactions can be a challenge for investors.
However, while the proof-of-stake mechanism allows for these profitable products, many cryptocurrency activists point out that it will move Ethereum from a centralized to a decentralized model.
For now, however, the Ethereum world can be advised to enjoy the moment of integration.
“There is likely to be volatility in the coming days,” said Caico Research analysts. But now the community can take a well-earned victory lap.