In mid-September, Ethereum is expected to launch its long-awaited upgrade called Merge. This is expected to reduce the energy usage of the ETH network by more than 99 percent. The network will move from proof-of-work (PoW) to proof-of-stake (PoS). Here are the details…
Miners will be out of the equation with the expectation of Merge
Removing miners from the equation will also lower operating expenses. The value from the fees will instead be distributed to those who stake the ETHs. The remainder will burn, which could be crypto-deflationary. Hal Press, founder of cryptocurrency hedge fund North Rock Digital, compares the new distribution structure to dividend returns and stock buybacks.
Even though we are in the crypto winter, old habits die hard. The change is causing some investors to act on the rumors. ETH hit its lowest price ever in mid-June when it dropped below $1,000, down nearly 80 percent from its all-time high. But by mid-August, it had hit $2,000 before falling back. On Wednesday, it was trading around $1,567.
The upgrade is indeed bullish news for Ethereum. Schueler, also known as Heart, who is the founder of ERC20 token Hex, thinks that this will stabilize and increase the price of ETH in the long run. Because, he says, selling pressure will be removed from miners who change their rewards to cover operating costs.
Something can go wrong for Hex
Richard Heart told Insider that Hex will also have issues if there is a disruption to Ethereum’s upgrade. Like any software upgrade, things can go wrong. This is one reason why he does not recommend making speculative bets before a merge. The risk is not limited to a drop in price. In traditional stocks, investors speculate all the time. They may even issue a stock if they think the underlying company will fail. However, a failed Blockchain upgrade may not necessarily mean a drop in price. Instead, he noted that it could lead to a freeze in operations.
Also, there is a strong possibility that the Bitcoin price will drop further, which has historically driven the price of ETH down as well. According to Coin Metrics data, Bitcoin and ETH have been consistently positively correlated since the end of 2017. It shows an upward and downward trend with a coefficient of 0.83. cryptocoin.com As we reported, the executive previously said that Bitcoin would need to go anywhere between $10,600 and $10,350 to bottom out. Currently, HEX is trading at $0.400, up 2.2 percent. On the other hand, Ethereum gained 7.2 percent and is around $1,623.
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