With the Ethereum (ETH-USD) merger soon, investors are beginning to emploi their bets on the outcome. There are at least three, if not more, assimilable scenarios for which specific financial équipement are designed Bet on any of these outcomes.
In this passage, I habitus at the history of the fork of Ethereum to try to get an insight into what could happen and offer my predictions on what will happen to Ethereum in the caleçon and délié term after the merger.
play the odds
The Ethereum merger is set for September 15-16 and will mark a historic ébranlé in the crypto world. Ethereum, the world’s assistant largest cryptocurrency and the most used blockchain for decentralized applications, will switch its approbation mechanism from Proof-of-Work to Proof-of-Stake.
This ébranlé will have many implications, many of which I discussed in my previous passage on Ethereum. For example, miners will become obsolete, previously stacked Ethereum will be launched, and the entire ecosystem will be affected, with the “power” now in the hands of ouvert ETH holders rather than miners. On the other balle à la main, merging should also result in better efficiency and lower transactions.
However, not everyone is happy with this result, especially miners. This is why the hard fork being suggested. This means that the “débouché” ETH network will still exist using PoW, possibly coexisting with the “new” blockchain built into PoS. The PoS chain will be Ethereum (ETH), while the PoW Ethereum fork will be a new cryptocurrency, with ETHPOW being the proposed token.
An interesting result is that Bitfinex, a prominent cryptocurrency exchange, has Create two tokensand ETH and ETHw so that traders can bet on the outcome of the merger.
Lessons from history?
In a previous passage on Cardano (ADA-USD), I looked at previous updates in the network. Cardano’s chart showed a modèle of spikes that led to updates and sell-offs after updates like Shelley and Goguen.
However, applying this same approach to Ethereum leads to inconclusive results.
In the métaphore above, past updates and insolent events in the history of ETH, shown above the ETH logarithmic chart.
The London update introduced changes to the ETH fee system, and we can see the price has gamin up quite a bit before then and then traded sideways a bit. Beacon Genesis marked the creation of the first block of the Beacon chain, the PoS chain into which ETH is integrated. Jaguar again, the price roseur up to and after the event, but this happened during a bull market.
Prior to that, we had seen sell-offs leading into Istanbul, followed by a strong rally and the “COVID écrasement”. Then, in the lead up to the Byzantine period, we saw some fluctuations and a strong recovery after that. Finally, ETH entered a appréciable bear étage after the Ethereum Classic (ETC-USD) fork.
There isn’t a very strong modèle here, but if there was one, it would be to organize ETH pools after updates. The big expectative is an ETC fork, and this is arguably the most similar scenario to the upcoming merger, which could also result in an Ethereum hard fork.
As I write this, we are two weeks away from a affermissement, and ETH is selling, having fallen close to 30% since its last rally. However, I think we are now on to a pre-merger rally, which will then be followed by a sharp sell-off. Again, this is based on technical analysis and my basic understanding of investor logic.
Since finding a pièce bottom around $850, ETH has moved in a predictable five-wave modèle. We have an primitif high in wave 1 and then a retracement in wave 2. Wave 3 reached 1.618 Fibonacci extensions of wave 1, then wave 5 turned at décompression 2. This is very much in line with Elliott waves theory.
These five waves form a larger wave of the first order, and we are now in an ABC amélioration of the assistant wave, with wave A nearing completion:
Based on this analysis, a reasonable target for the assistant wave would be around $1,200, which is the 61.8% retracement of the first wave. However, before we reach that excessif level, we must go up strongly in wave B, which could voiture previous highs. .
So, based on this number, I believe that ETH will rally strongly as we approach affermissement and sell aggressively after or just before it.
This also makes sense from a “fundamental” étendue regarding supply and demand dynamics and past split events. For starters, as we get closer to affermissement, gonflant aliment will be released from the Ethereum stake, creating some supply pressure. In fact, there is evidence that “whales,” ouvert ETH wallets, were moving their holdings to exchanges, possibly with the idea of selling.
The merger would also be a hasard of inherent fusion and volatility. I expect problems to arise, as well as other investors. This creates selling pressure as well.
Finally, the fact that a group of the Ethereum community is looking to convert Ethereum into ETHPOW will also create uncertainty and pressure on the price.
Still, do I think ETHPOW will compete with Ethereum? If history is any exposé, it is unlikely. While Ethereum Classic is still a prominent cryptocurrency today, it doesn’t compare to Ethereum, and there is no real nouveauté in app development. The decision to move ETH to a PoS approbation mechanism was deliberate and well thought out. There’s a reason for that, and I think it’s the right move.
In general, the upcoming affermissement will be surrounded by volatility. I’m expecting a big move up and a big jazz down. However, when the dust settles, ETH will be ready to continue rising and reach all-time highs, as it will remain the gantelet blockchain platform for developers in the crypto space.