Thread by @systems_value

A 🧵 on the $ETH Merge - one of the largest and most misunderstood upgrades crypto has ever seen during its existence. 🚀

In this thread I lay out the bull case for why I think the Merge may defy the awful macro backdrop and why most are missing the forest for the trees. 👇

The Merge will bring with it significant changes to Ethereum - the most obvious being the move from PoW to PoS.

I won't spend much time here, but realize that the energy and ESG narrative will be profound in mainstream media.

The significantly more interesting topic of discussion is around the changes of the structural flows due the Merge.

I'll try and simplify this to the best of my ability, as I think this is not well understood by 95%+ of CT.

Structural flows cannot be front-run. It simply doesn't work. In ETH's move to PoS, issuance and sell-pressure (important to note these are two different things) are massively reduced.

You can't front-run that - not for a longer period of time anyway.

In its current PoW state, most of ETH issuance goes to miners.

Around 15k tokens daily.

By most estimates, miners insta-dump approx. 85% of their rewards for operating expenses and profits. This is around 12,750 tokens PER DAY.

~$20M in structural sell-pressure daily.

In a PoW design this is inevitable.

That's to say that this will always be a problem with BTC, but no longer with ETH - starting tomorrow.

Incredibly exciting - but that's not all!

With PoS, issuance is estimated to drop by around 70%.

From 15,000 -> 4500.

This alone would be massively beneficial, as the supply side is getting severely reduced. Forever.

The remaining rewards are distributed to ETH stakers. People that own ETH, stake it and want more.

Will they insta-dump rewards?

Doubtful. There are no mining costs to cover.

The cherry on the cake is that for the first months post-Merge, stakers can't even withdraw their staking rewards.

This means that immediately after the Merge, ETH issuance drops 100%.

In the long-term, approximately 90%.

This is where the term triple-halving comes from.

So imagine an environment where ETH is relatively stable - supply and demand match. That's the current scenario.

Starting TOMORROW, the structural supply side pressure gets almost entirely wiped out.

ETH will have to have $20M of sellers daily for the price to NOT move up...

(above is from @NorthRockLP)

Importantly, ETH issuance is token notional instead of FIAT.

ETH at $3K will yield significantly higher USD yield than it does now.

In a PoW model, the $ value of pressure on price from miners would be higher as well.

Gone starting post-Merge.

ETH will also now have a native yield tagged on to it - a massive driver of both retail and institutional interest.

Green narrative + native yield + a safe network + lack of sell pressure = REFLEXIVE demand.

So to sum things up...

https://twitter.com/DeFiSurfer808/status/1570032273365569541

A massive structural supply flow gets wiped out effectively immediately, while ETH as an asset multiplies in attractiveness.

I believe that this will create a slow grind up that will create one of the biggest narratives of Q4'22 and entirety of '23. A reflexive force. 📈

Halvings are rarely instantly bullish in terms of PA. Don't expect god candles.

But over time, the structural change will chip at the chart.

Day-by-day, the demand side will overpower the supply side due to the changes introduced by PoS, creating an explosive narrative.

Expect volatility post-Merge - could be that way for weeks, but long term I do not see a future where Ethereum as an asset doesn't overperform by a long shot.

As usual, NFA, DYOR and good luck everyone.

Today is a historical day for crypto. 🙏🏻

https://twitter.com/Pentosh1/status/1570021617832534018

Also a big thanks for @NorthRockLP for influencing my thinking around the Merge - I've taken a lot of inspiration from your articles and feed.

While the timing was off, I believe this is the best article ever written on the Merge: medium.com/@halp1120/1-th….

cc'ing some ETH bulls...
@ethersole
@Pentosh1
@DeFiSurfer808
@tztokchad
@Tetranode
@NorthRockLP
@0xMrFreeze
@SalomonCrypto
@chutoro_au
@tanoeth
@Riley_gmi
@DegenSensei
@kamikaz_ETH
@SmallCapScience
@0xJezza
@DAdvisoor
@1sat1c
@SalomonCrypto
@conzimp
@FroyoFren
@0xHamz