Commemorative tokens representing the Bitcoin, Ethereum, Dogecoin and Ripple cryptocurrency networks sink into water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic/Illustration/File photo
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Sept. 20 (Reuters) – Fusion came, saw and conquered. Not that you’d guess from crypto prices.
The Ethereum blockchain mega-upgrade finally went live on September 15th, moving it to a less intensive “proof of stake” (PoS) system with almost no hiccups. Read more
While anticipation of the event had seen Ether rise around 85% since its June crash, it has since plunged 19%, hitting along with bitcoin and other assets of risk due to investor anxiety over inflation and central bank policy.
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However, many market players are optimistic about the long-term prospects of Ethereum and its native cryptocurrency.
“In the past, we have talked to sovereign wealth funds and central banks to help build their digital asset allocations…but direct investment has been rejected due to energy issues,” said Markus Thielen, the manager’s chief investment officer of assets IDEG Limited.
“With Ethereum moving to PoS, this clearly solves this last pillar of concern.”
Some crypto investors are turning their attention to the next event that could shake up prices.
The next significant upgrade for Ethereum is “Shanghai,” predicted by market participants in about six months, which aims to reduce its high transaction costs.
It would allow validators, who have deposited ether tokens into the blockchain in exchange for a return, to withdraw, hold or sell their staked coins.
There’s a lot at stake: More than $20 billion worth of Ether deposits are currently locked up, according to data provider Glassnode.
The staked cryptocurrency Ether, seen as a bet on Ethereum’s long-term success as it cannot be redeemed until Shanghai happens, is trading at near parity with Ether, according to data from CoinMarketCap at 0.989 ether, according to data from CoinMarketCap, indicating confidence in future upgrades.
The coin had fallen to 0.92 in June.
PURGE AND SPRAY
Beyond Shanghai, a number of upgrades are planned for Ethereum, which co-founder Vitalik Buterin has dubbed “the surge,” “virgin,” “purge” and “splurge.”
The main focus of future updates is likely to be the blockchain’s ability to process more transactions.
“Because the merger was delayed for several years, investors, traders and end users are very anxious about when Ethereum will scale significantly,” said Alex Thorn, head of enterprise-wide research at the focused bank on the Galaxy Digital blockchain.
Paul Brody, global blockchain leader at EY, said: “The future of Ethereum needs and will scale to hundreds of millions of transactions per day.”
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ETHEREUM KILLERS
Merge’s main goal was to reduce Ethereum’s energy use as cryptocurrencies come under fire for their massive carbon footprint. The blockchain’s energy consumption was reduced by an estimated 99.95%, the developers claim, which could tempt powerful institutional investors, previously constrained by environmental, social and governance (ESG) concerns.
The merger and future upgrades also affect the investment appeal of so-called “Ethereum killer” blockchains like Solana and Polkadot, said Adam Struck, CEO of venture capital firm Struck Crypto.
However, institutional investors are not yet jumping in as a fearful macro environment chills the waters of risk appetite.
In the longer term, however, the switch to PoS is expected to decrease the issuance rate of Ether tokens, potentially by as much as 90%, which should push prices higher.
Additionally, the 4.1% annual returns for staking ether tokens to validate transactions could be tempting for investors.
However, while the proof-of-stake method allows for these lucrative returns, many cryptopurists point out that it moves Ethereum away from a purely decentralized model, as larger validators could exert greater influence over the blockchain.
For now, however, the Ethereum world can be advised to enjoy the Merge moment.
“There may be volatility in the coming days,” Kaiko Research analysts said. “But for now the community can take a well-deserved victory lap.”
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Reporting by Lisa Pauline Mattackal and Medha Singh in Bangalore; Editing by Pravin Char
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