What will happen with price of Ethereum 2.0?
Ethereum merge is the process of merging Eth mainnet with the Beacon network, which is now running and based on PoS. Let's not discuss once again what PoS and PoW are, but consider this event from a price point of view.
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Ethereum merge is the process of merging Eth mainnet with the Beacon network, which is now running and based on PoS. Let's not discuss once again what PoS and PoW are, but consider this event from a price point of view.
Big thread🧵
Will gas get cheaper?
Not immediately. The merger is an internal technical update, so don't expect gas fees to go down right away. Only when the next step of the roadmap, sharding, is implemented will network capacity increase dramatically and allow for lower fees.
Not immediately. The merger is an internal technical update, so don't expect gas fees to go down right away. Only when the next step of the roadmap, sharding, is implemented will network capacity increase dramatically and allow for lower fees.
Staking profits.
How high will the percentage of rates be after the merger? Right now, steakers are only rewarded by the Beacon Network Validator. After the merger, stacking rewards will be based on block, tips, and MEV.
How high will the percentage of rates be after the merger? Right now, steakers are only rewarded by the Beacon Network Validator. After the merger, stacking rewards will be based on block, tips, and MEV.
Importantly, the stacking reward will depend on the amount of stacking $ETH - the higher it is, the lower the percentage. Based on the current volume of $ETH staked - the post-merger yield is estimated to be about 10%. In the long term, this is projected to drop to 4-5%.
Ethereum will become deflationary.
After the move to PoS, the release of new $ETH will reduce so much that the asset will become deflationary - more will be burned than released. Ethereum will move from a mine-and-dump economy to a stake-and-hodl economy.
After the move to PoS, the release of new $ETH will reduce so much that the asset will become deflationary - more will be burned than released. Ethereum will move from a mine-and-dump economy to a stake-and-hodl economy.
Before the merger, the total reward per block for miners is about $13,000 $ETH per day. After the merger, miners will not be pressured on the price and the new amount of $ETH released will drop to $1,500 per day.
This ~90% drop corresponds to about three halvings of bitcoin( sometimes called triple halvings). If you subtract from that ~8000 burned $ETH per day, you can assume that substantial issuance will be reduced by about 1-2% per year.
Will this lead to a price pump?
Probably. A successful merger would give:
1. More demand
2. Less supply
This could be a very powerful push upward for the price. BUT. If the merger happens at a time of economic uncertainty, at the bottom of a bear market,
Probably. A successful merger would give:
1. More demand
2. Less supply
This could be a very powerful push upward for the price. BUT. If the merger happens at a time of economic uncertainty, at the bottom of a bear market,
it's hard to see how a successful ETH transition would really affect the price. In addition, the market is notorious for the influence of reverse psychology:
"the price rises in anticipation of something good, but calms down and corrects when the good actually happens." We know from the history of bitcoin halving that it takes time for changes to affect the price.
Unlock of the stacking $ETH
Another factor that puts pressure on the price is the large number of users who can pull their $ETH from Beacon network and sell it. Incase of a partial unlock in the first few days after the merger, around 28,000 $ETH per day would pour into market
Another factor that puts pressure on the price is the large number of users who can pull their $ETH from Beacon network and sell it. Incase of a partial unlock in the first few days after the merger, around 28,000 $ETH per day would pour into market
For comparison, the current pressure of miners is 14,000. Consequently, in the case of a partial unlock, nothing terrible will happen. But there is a possibility of a complete unlock. According to the protocol validators can not do it immediately, as it will lead to instability.
In the case of panic, there will be huge queues for unlocking and long pressure from vendors. So far the probability of such a situation is small, but it is there.
So what happens after the Merger?
It's important to understand that the transition to PoS is a very complicated process that hasn't been attempted before. It has taken 6 times longer than originally anticipated.
It's important to understand that the transition to PoS is a very complicated process that hasn't been attempted before. It has taken 6 times longer than originally anticipated.
Will there be success?
Most likely, but there are always things that cannot be predicted. Let's assume that the merger goes perfectly at the perfect time. Ether will remain the dominant player in the tier one network slice(there is no reason to assume otherwise).
Most likely, but there are always things that cannot be predicted. Let's assume that the merger goes perfectly at the perfect time. Ether will remain the dominant player in the tier one network slice(there is no reason to assume otherwise).
We can safely expect the price to rise in the long run. Because it's an important step towards great scalability, which means a large number of users. And don't forget the deflationary pressures after the merger. From an investor's perspective, Ethereum will be different
It could be a source of passive income for more than just miners. There is every reason to believe that $ETH stacking will come to the attention of institutional investors. Also, the new ether fits better than bitcoin in the concept of environmental protection.
If institutional investors come in, demand will grow tens or hundreds of times, and with it the price.
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