Only two weeks separate the crypto community from migrating the entire Ethereum blockchain to the PoS mechanism. Some experts expect an increase in the ETH rate against this background, others warn of risks
In mid-September, the long-awaited update The Merge will take place in the crypto space – the transition of the entire Ethereum network from the energy-consuming PoW consensus mechanism to PoS, which is considered more environmentally friendly.
The Bellatrix upgrade is scheduled for September 6th, after which – roughly September 13th, according to CoinGecko COO Bobby Ong – there will be a final upgrade of Paris and the migration of the entire Ethereum mainnet to the Proof-of-Stake (PoS ) algorithm.
ETH Will Shoot Up
In addition to the environmental friendliness of the new algorithm, Vitalik Buterin, the co-founder of Ethereum, recently named a higher level of network security as another big advantage of migrating to PoS . In theory, all this should benefit the ecosystem.
Justin Bones, founder of Cyber Capital, one of Europe’s oldest cryptocurrency funds, also sees the PoS model as much more effective in terms of protection.
He adds that half of the commissions will be burned. “This means that after the migration, ETH will essentially become a deflationary asset with negative inflation readings.”
This will potentially reduce the total supply of coins in circulation and increase their value for coin holders.
These prospects partly explain the excitement around the upcoming update. According to CoinGecko data , Ethereum has risen by almost 8% over the past 7 days.
Traders in the crypto derivatives market are also clearly betting on Ethereum. Open interest on ETH options amounted to $6.6 billion, exceeding $4.8 billion for Bitcoin for the first time in history. Analysts highlight other growing on-chain indicators of network activity.
At the same time, Bones believes that the coin is still undervalued.
“The question often arises: how much the markets have included merge in prices. I don’t think it’s completely 100% already.”
In particular, he blames the opponents of Ethereum and their campaigns to misinform crypto market participants.
ETH Will Collapse
Despite the recent price increase, we should not forget that before that, the coin rate fell by almost 30% from the values reached in mid-August above the $2,000 mark.
The pressure factors on the currency were both news about critical vulnerabilities identified in client protocols created for the upcoming move to the PoS algorithm, and the hawkish policy of the US Federal Reserve, aimed at decisively fighting inflation.
Meanwhile, some skeptics believe that everything that is happening now is a banal and obvious pumping of the Ethereum rate in anticipation of the upgrade. This opinion was expressed on Twitter by the popular cryptanalyst il Capo Of Crypto and predicted a collapse in the ETH rate after Merge.
He is not the only one who fears that the market is highly likely to act out the “sell on the facts” scenario.
Whatever it was, but updating a huge and actively used protocol is really a very risky business. Currently, about 1.3 million transactions are made on the basis of Ethereum daily, and the number of active applications based on this blockchain is more than 3,400.
A failed Merge upgrade could potentially jeopardize all of these projects and cause the market to collapse. Therefore, some crypto platforms are seriously preparing for an Ethereum upgrade in order to protect themselves from possible risks if something goes wrong.
For example, the DeFi protocol Aave has temporarily suspended lending in Ethereum ahead of the Merge. Coinbase, the largest US crypto exchange, will “briefly” pause withdrawals and deposits in all Ethereum-based tokens at the time of the event.