The merge is near, so it’s Ethereum time to shine. Over the last few days, Ethereum has been outperforming bitcoin as the second most-popular cryptocurrency according to market capitalization. Is the reason the return of the market’s appetite for risk? Or is it just the fact that Ethereum’s developers announced a specific date for the mythical merge? Let’s examine the numbers, the facts, and the experts’ opinions to figure out exactly what’s going on.
In The Weekly Update, Arcane Research’s newsletter, they point out that the ETHBTC pair surged “ from 0.053 on July 12th to 0.7 on July 19th.” It’s at “levels not seen since mid-May,” but why? According to Arcane, it “might be related to increased risk appetite in the market, evident by sharp altcoin recoveries across the board.” They identify another factor, “Celsius repaid its DeFi loans. This contributed to reducing the downward gravitational pull enforced by potential liquidations and contagion-related uncertainty.”
And then, of course, there’s the merge.
What do the experts think about the merger?
These are the facts. Ethereum is on a roll. NewsBTC previously reported on Ethereum. Analyzed the state of market:
“Ethereum has now broken above an important technical point. After trending below 50-day moving mean for most of the month, ETH is now comfortably above this technical level. The implication of this has been a complete 180-degree turn from bearish to bullish, especially during the short term.”
Arcane Research has already listed two possibilities as the probable cause. However, the most important one is the possibility for the merger. The Weekly Update
“On Thursday, July 14th, the Ethereum Foundation member Tim Beiko suggested Sept 19th as the tentative launch date for the merge. This might have benefited ETH, leading to last week’s surge. Following the announcement, Lido’s staked ETH token has neared ETH parity.”
Another NewsBTC report We also quoted another expert It is difficult to grasp the current situation. According to Youwei Yang at StoneX, director of financial analysis, the main causes of the recent surge were:
“The first is the recently announced time for the Ethereum “merge” update, which should make the network significantly more energy-efficient. Yang claims that the “calming” of macroeconomic anxieties is the second.”
ETHBTC price chart at Coinbase | Source: ETHBTC by The Weekly Update
Is Ethereum’s Merge a “Buy The Rumor” Event?
While the change from Proof Of Work to Proof Of Stake consensus mechanism uses less energy, it brings with it its own set of challenges. These issues are beyond the scope and reach of this article. The key part for Ethereum holders, however, is that the merge will finally bring native stake to the blockchain. The thousands of ETH that are already in the Beacon Chain will produce tangible results. A new type of user will emerge, called validators.
Is that enough to justify the price hike? Absolutely. It’s almost certain that the merge will occur on September 19th. Given that Ethereum has postponed the difficulty bomb five times, it is likely not.
Source: ETH/USD on| Source: ETH/USD on TradingView.com
What is the Contagion Event that Redundant Everything?
According to Arcane, “contagion seems to be resolving now, with prices stabilizing. This recovery may be viewed as a healthy confirmation of the market normalizing as market stress settles down.” Their interpretation of The situation However, this optimism might be too optimistic. A pseudonymous Twitter user that identifies himself as “a trader/defi analyst at a major crypto fund and use Nansen almost daily,” thinks more pain is on the way with or without the merge.
3AC still owns dozens of wallets with thousands of Ethereum. It’s very likely that all of these wallets are going to be liquidated in order to pay back creditors. You can see the total amount of funds that have been moved from one wallet. pic.twitter.com/75HkR097zV
— jbjbjb (@bryptobricks) July 19, 2022
The Three Arrows Capital trial is still unfolding, and “3AC still has with thousands of ETH. It’s very likely that all of these wallets are going to be liquidated in order to pay back creditors.” If that happens, it’s “going to cause a harsh sell-off across the broader crypto ecosystem, setting up the next catalyst down.”
Sorry to rain on Ethereum’s parade, but those are the facts. We wish you all the best with the merger.
Featured image by Loic Leray OnCharts byUnsplash | Charts by TradingView The Weekly Update