September is going to be a very interesting month in the history of crypto space considering Ethereum’s transition to proof-of-stake network in the form of Ethereum merge is closer than ever. It is undoubtedly touted to be one of the biggest events to ever occur but regardless of the hype, most investors are left wondering what impact it could have on Ethereum’s price after the merge. While it has shown tremendous strength before the merge as we have seen in the past few weeks, everyone is still worried if this is going to be another ‘buy the rumor, sell the news’ event.
Ethereum since its inception in 2015 has been one of the prime assets in the crypto space. It brought about the use of smart contracts that allowed crypto applications to run on it as a base layer. Every transaction on Ethereum has to be initially validated. However, it is known that it has been running on a proof-of-work setup which is similar to Bitcoin but in Ethereum’s case, it is not a store of value like Bitcoin.
You cannot scale your web3 applications on Bitcoin like you can on Ethereum. Applications need to be fast, cheap and more scalable in order to keep evolving which sparked Ethereum’s transition to proof-of-stake to get rid of its biggest weakness. Other layer-1 coins came in competition with Ethereum focusing on scalability by using proof-of-stake validating mechanism as opposed to Ethereum in order to be cheaper and scalable.
However, everything changes now with Ethereum moving to a mechanism where transactions will need to be validated by ETH stakers. The migration already took place in the month of September. Do read our previous article where we discussed the Ethereum merge in a deeper context to get a better idea of what it is and what changes it will bring. While the merge has been anticipated for a very long time, there is no guarantee everything will go well. Just to cover this point, prices would likely go down. If there is any possibility of something going wrong, it would cause delay to the whole thing. This is something to consider since it happened back in the day as well.
Effect on Ethereum Gas fees:
Do note that despite the shift to proof-of-stake, Ethereum gas fees will not go lower. Gas fees mostly relate to the demand for block space in Ethereum network which despite the transition remains high as ever leading to no change in fees. But there are plans to work on it after the merge in the next sharding Ethereum update. Aside from the technical implications, even if everything goes well there is a general consensus that this could be a ‘buy the rumor, sell the news’ event which is a pretty common scenario in the crypto space.
It is a phenomenon where good news leads to price surge before eventually going down in value once the news is officially confirmed. In this instance, this is revolving around the climate before the merge and then after the success of the merge. To put fuel to this, Ethereum has majorly outperformed Bitcoin since they had a big crash a month ago. Everyone is betting big on the merge and buying a significant amount of Ethereum.
Open interest for Ethereum has been reaching sky high limits compared to the low it achieved back in July meaning every trader is anticipating higher prices ahead of the merge. As positive as it sounds, this would also indicate that there are a lot of sellers in the market that are looking to sell Ethereum after a pump closer to merge.
Positives and negatives after ethereum merge:
We will also see around 13.3 million in staked ETH beginning to unlock which means around 20 billion worth of ETH will be out in the market for selling at current prices. Unlocking will remain gradual over the next 12 months with 11% of total ETH supply being unlocked. We have discussed everything negative happening around the merge but there are many positives as well, starting with the new 8% staking yield offered to holders. This kind of high APY should attract many buyers, especially institutional investors to get in Ethereum.
Considering Ethereum is the most used blockchain having countless utilities which after the merge would have removed all risks associated with it is bound to get more interest from investors. 8% yield on the 2nd biggest digital asset in the space certainly does not sound bad. Ethereum merge will completely wipe away the role of miners from the network. This would lead to reduced Ethereum minting making it a deflationary token thanks to Ethereum burn.
Now with a combination of burning Ethereum in every transaction and lower block rewards could significantly reduce Ethereum’s supply and even end up making it deflationary. Not to forget, this would also support the ‘green’ agenda for environmentally conscious investors. As discussed prior, scalability has been the biggest weakness for Ethereum despite retaining over 70% market share in decentralized applications in the space. The Ethereum ecosystem despite being not as scalable has continued to grow but now with this transition to proof-of-stake will only lead to more development activity on Ethereum network.
Ethereum price prediction after merge
Ethereum has been one of the most trusted assets and protocols in the blockchain space and with this new upgrade it is only going to get better and better. However, in my personal opinion we will see major volatility in the market due to merge due to investors being confused over what the whole operation will lead to. I believe we can see a short-term dip in Ethereum’s price following the merge but in the larger context looking long term, Ethereum is my best bet in the market for getting the best and safest gains.
Post-merge could lead to a great opportunity for investors to get in and most likely many are already looking out for it. Always remember that dollar cost averaging is your friend. After the merge, things will only get better for Ethereum.
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What will happen after ethereum merge?
Ethereum merge is Ethereum’s transition from proof-of-work to proof-of-stake network in the form of Ethereum merge. Their will be no effect on users wallet. Users will still see ETH as ETH in their wallets.
Can ethereum merge with 2.0?
You may heared about ethereum2.0 or ETH2.0 by the influencers in past few days. But the Ethereum foundation has named it the “Ethereum Merge” for months.
Will ethereum merge reduce gas fees?
Despite the shift to proof-of-stake, Ethereum gas fees will not go lower. Gas fees mostly relate to the demand for block space in Ethereum network which despite the transition remains high as ever leading to no change in fees.