Katie Talati, director of research at investment firm Arca, thinks traditional financial institutions are missing out on opportunity. Currently, ETH is very low priced, she says. Because according to Talati, Ethereum Merge will be a catalyst around the corner.
“People have an incomplete perception of Ethereum Merge”
cryptocoin.comAs you follow, next month, Ethereum Merge, which the crypto ecosystem has been eagerly waiting for, will be launched. Ethereum will have thousands of applications transferred to a new and improved Blockchain. It will transition to Proof-of-Stake (PoS) Blockchain with Ethereum Merge. Katie Talati, who also led Arca’s investment research, says:
This is an event that many people under-perceive, especially due to the current price increase of Ethereum. A year from now we will look back and realize that we were at the bottom of the market there.
Of course, that’s just Talati’s opinion. But it’s an opinion widely shared among industry insiders. Ethereum Merge has upside potential in the market at a time when most titles are risky and not rewarding for crypto holders.
Meanwhile, Katie Talati notes that individual interest in crypto has increased over the past few weeks. Still, “there are no new institutions coming in,” she says. However, according to Talati, Ethereum will have much more important and larger buyers.
“ETH will become a deflationary asset”
Katie Talati says there are structural reasons why she expects ETH to gain value after Merge. She makes the following statement in this context:
From a financial perspective, the net issuance of the supply of ETH will be net negative. In other words, there is hope that ETH will become a deflationary asset and make hodl more valuable over time.
What does the ‘thirdening’ of Ethereum mean?
For at least six months after Ethereum eliminates PoW, users who have staked their assets will not be able to withdraw their holdings immediately. This essentially creates a “supply sink” that limits the issuance of new ETH into circulation. Add to that the fact that there will be an incentive for people to lock their ETH in Ethereum to earn staking rewards.
Talati said, “With Stake, you will see the circulating supply of ETH increase. But it will not actually be possible for individuals to sell,” he says. Some people refer to it as the ‘thirdening’ of Ethereum, referring to the ‘halving’ of Bitcoin. Experts assess that these programmatic supply cuts sometimes drive prices up.
What are the risks for Ethereum Merge?
Still, there are risks to trading. According to Talati, firstly, it is possible that Ethereum’s Merge will be delayed. This sends a ‘negative signal’ to the markets, at least in the short term. Then there’s the possibility that something went wildly wrong during or after the deployment. It’s a risk that’s hard to calculate, given all the moving parts that can break.
Another risk is all planned and possible Ethereum forks that will protect the PoW algorithm. Talati says this will shake the market. Some leading crypto firms have pledged to support some PoW forks, such as ETHPOW, backed by prominent miner and investor Chandler Guo.
There is also potential selling pressure on ETH when people can unlock their crypto. Some people have locked their ETH for nearly two years since the Ethereum 2.0 deposit contract went live with the experimental Beacon Chain. They also earned returns on their capital in the form of betting rewards that could be sold for cash or reinvested.
“This behavior is a bit difficult to predict,” Talati says. He also adds that many early stakers are long-term supporters of Ethereum. These refer to stakers who are less inclined to sell.
It is possible to add that most of Ethereum’s issuance schedule has changed. There is no guarantee that ETH will be deflationary, which is a major selling point for institutions that depend on high levels of ETH usage. So, considering the financial, technical and other unforeseen risks of the biggest Blockchain upgrade in history, is there a way to protect your bets?
Investors seem to be aware of the downside risk. Talati says there are put options for ETH that allow people the option to sell an asset. However, he adds that the contracts are really expensive in the current market.
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