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Ethereum (ETH)’s Long-Awaited Upgrade — Generally merge— could be the most important event in the cryptocurrency market this year.
The final stage of this major upgrade to the network of major altcoins began on September 6th with the implementation of the Bellatrix upgrade.An upgrade that marks the move from Ethereum proof of work mechanism to Proof of Stake chain. When the U.S. market opened on Sept. 6, ETH’s price was up nearly 4%, trading at $1,664.
“The merger is still expected to happen around 13-15 (September). What is happening today is the Bellatrix hard fork that prepares the chain for integration,” said the Ethereum co-founder. Vitalik Buterin tweeted on September 5th.
Despite the enthusiasm for the merger, there are some last-minute concerns.
Some users worry that the Ethereum blockchain will fork after the merger. A fork is when a group of users run a separate blockchain from the main one. If Ethereum forks after the merger, liquidity could suffer as investors start withdrawing ETH tokens to exchange for the forked tokens.
Aave (AAVE), a decentralized financial protocol, has already voted to stop lending cryptocurrencies on September 2nd. The Aave community feared that users would borrow too much Ethereum, which could affect the liquidity of the cryptocurrency.
Factors like these have led some analysts to suspect that the consolidation could reduce the overall supply of Ethereum, making the cryptocurrency more valuable for those who already hold it. I’m here.
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Why Ethereum Is Rising
The price of Ethereum is gradually increasing as the major upgrade approaches.
Some enthusiasm for ETH has centered on the cryptocurrency’s prospects, with investors viewing the token as a buy-and-hold opportunity for future profits.
After surging to $2,000 in mid-August, Ethereum fell after a brief sell-off from August 25th to August 29th. ETH Price Dropped in Fed News and Fed jackson hole of its plan to combat inflation with higher interest rates.
Ethereum’s late-summer rally bottomed out on June 18 when Ethereum fell to a 52-week low of $880.
From April to June, ETH fell more than 70%, breaking below the all-important $1,000 barrier in June.
Bitcoin (BTC) was only down 52% over the same period. bottoming out Out at $17,708 in June. Since then, BTC has recovered about 12% to around $20,000. ETH has risen more than 86% from its lows to break the $1,600 barrier.
Ethereum Merge Price Prediction
Consolidation has been in the works for years, but no one knows how Ethereum 2.0 will work for users. A change of this magnitude has rarely been attempted in the cryptocurrency world.
This merge aims to transform Ethereum from a Proof of Work protocol to a Proof of Stake. The former uses a crypto miner to add blocks to the blockchain, while the latter uses a validator to stake his ETH for the chance to expand the blockchain.
This conversion to Proof of Stake is achieved by merging the Ethereum mainnet with the system’s beacon chain. This is a proof of stake chain running on the Ethereum network since December 2020. Launching the beacon chain was the first step in the merge.
The next step is the upgrade of Ethereum’s Bellatrix, which launched on the morning of September 6th. The remaining steps in the process, called the Paris upgrade, are expected to be implemented around September 15th.
Unless major disruptions occur during the upgrade process, many crypto insiders believe investors should expect positive returns as a result of the merger.
Updating an entire blockchain protocol in heavy use is still a very difficult task. An estimated 1.3 million transactions occur daily on the Ethereum network.
Ben McMillan, co-founder and chief investment officer of IDX Digital Assets, says the options market is very bullish on mergers. In the month before the merger, ETH derivatives trading volume increased by 10%. The second-largest cryptocurrency surpassed Bitcoin in derivatives trading volume.
However, McMillan is also concerned that a “buy the rumor, sell the news” mentality may be underway that could hurt Ethereum’s price in the short term after the merger.
If the merger goes smoothly, some investors may liquidate their positions after the transaction. After a merger, these investors may believe they have already capitalized on that value, and may then sell their positions, causing a short-term price decline.
Anthony Scaramucci, founder and managing partner of global wealth management firm SkyBridge Capital, told CNBC earlier this month that many traders would “probably sell on merger news.”
Ethereum Price Trend
The consolidation should definitely have a short-term impact on the price of Ethereum. Traders may want to follow these developments closely. But the question for other investors is where Ethereum will go in the long term.
No one knows what the price of ETH will be by the end of the year. McMillan predicts that Ethereum will reach a price “over $2,000” by late 2022.
Clearly, this is a bullish price forecast, and several factors could play a role.
In addition to consolidation, many crypto insiders hope investors will look at macroeconomic factors such as inflation and government regulation of cryptocurrencies to determine their investment strategy for the rest of the year.
Cryptocurrencies have not proven to be a hedge against inflation, as claimed by some early Bitcoin adopters. Instead, many cryptocurrencies, especially ETH, are starting to move in step with riskier stocks like the technology-heavy Nasdaq.
This means that macroeconomic factors such as inflation may continue to put pressure on the overall price of ETH. In an inflationary environment, many investors tend to retreat to commodities such as oil and gold and show less interest in riskier investment vehicles such as technology stocks and cryptocurrencies.
Much attention is also being turned to the US government and other international regulators, as regulation can have a significant impact on cryptocurrency prices.
Ethereum, like all cryptocurrencies, has proven to be a highly volatile investment, with the slightest bit of news being able to trigger rapid price movements.
ETH, which peaked above $4,600 in November 2021, is now down more than 66% to around $1,600.
McMillan predicts that ETH will break the $2,000 psychological barrier again by the end of this year, but cryptocurrency volatility can make it difficult to accurately determine this kind of price prediction. there is.
McMillan advises investors to consider cryptocurrencies like Ethereum, similar to Nasdaq stocks in the late 1990s. “Be aware of the short-term risks.
Of course, with high-risk investments like cryptocurrencies, investors should remain aware of the risks and should never invest more than they can afford to lose.
Ethereum and other cryptocurrencies are volatile and risky investments that can change direction quickly. Investors should always exercise due diligence and be prepared for the volatile nature of these investments.