No products in the cart.
- Latest
- Trending
ADVERTISEMENT
Marcus Sotiriou, Analyst at Listed Digital Asset Broker global block (TSXV:BLOK).
Bitcoin opened trading above $22,000 on Monday morning, ahead of Tuesday’s pivotal US CPI release and the highly anticipated Ethereum merger due in the next few days.
A merger is the most influential event to ever occur in the cryptocurrency industry and is viewed by most cryptocurrency investors as a very positive event. This marks a significant change for Ethereum as it moves from Proof of Work to Proof of Stake leading to a reduction in network energy usage and the issuance of new tokens.
However, it carries significant risks that could disrupt events in the short term. For example, many people in the ecosystem may not be ready to handle the new chain because they have not updated their software. Also, some APIs can break in ways that many people can’t predict. Additionally, there could be another delay that will frustrate investors who have been waiting for years for this transition to take place.
Merge is a highly complex technical event, encompassing not just one large company, but an entire decentralized network, so there’s a reason it doesn’t go smoothly.
Nevertheless, in my opinion, the long-term implications are very beneficial for the wider crypto space, Ethereum.
This is because the merger is reported to reduce Ethereum’s energy consumption by about 99.95%. One of his biggest hurdles for institutional investors to enter the cryptocurrency industry is his ESG story, and Merge could alleviate this concern and improve the reputation of the entire asset class.
Investors in ETH also receive a yield of around 5%. This means that the DeFi sector as a whole will have a benchmark yield relative to yield, so the DeFi space could thrive as investors now have a way of assessing risk. Investors love cash flow, so being able to receive favorable yields is another attractive advantage that makes ETH more investable for them.
Lower energy usage and yields post-merger could be an important catalyst for institutions to enter the cryptocurrency space in bulk over the next five years, but the near-term risks associated with the transition make the outlook bleak. It can be a difficult week.
