The Ethereum blockchainThe mega-upgrade finally went live on September 15, moving it to a less power-hungry “proof-of-stake” (PoS) system with barely a hiccup.
Even though anticipation for the event saw Ether rise around 85% from its June slump, it has since sunk 19%, hit with bitcoins and other assets risked by investor anxiety inflation and central bank policy.
Nonetheless, many market participants are optimistic about the long-term prospects of Ethereum and its native cryptocurrency.
“Previously, we spoke to sovereign wealth funds and central banks to help them build their digital asset allocations … but direct investments were rejected due to energy issues,” said Markus Thielen, chief investment officer at the manager. of IDEG Limited assets.
“With Ethereum moving to PoS, it clearly solves that last pillar of concern.”
Discover the stories that interest you
Some crypto investors are now turning their attention to the next event that could shake prices up.
The next significant upgrade for Ethereum is “Shanghai”, expected by market participants in about six months, which aims to reduce its high transaction costs.
This would allow validators, who have deposited ether tokens on the blockchain in exchange for return, to withdraw their staked coins, hold them or resell them.
The stakes are high: more than $20 billion in ether deposits are currently locked up, according to data provider Glassnode.
The staked ether crypto coin – seen as a bet on the long-term success of Ethereum as it cannot be traded until Shanghai arrives – is trading at roughly parity with ether at 0.989 ether, according to data from CoinMarketCap, indicating confidence in future upgrades.
The coin had dropped as low as 0.92 in June.
Purge and splurge
Beyond Shanghai, a slew of other upgrades are planned for Ethereum, which co-founder Vitalik Buterin has dubbed “the surge,” “verge,” “purge,” and “splurge.”
The main focus of future upgrades will likely be the blockchain’s ability to process more transactions.
“Because the merger has been delayed for several years, investors, traders, and end users are very apprehensive about when Ethereum will scale significantly,” said Alex Thorn, Head of Research at Scale. from the company to the blockchain-focused bank Galaxy Digital.
Paul Brody, Global Blockchain Leader at EY, said, “The future of Ethereum must and will scale to hundreds of millions of transactions per day.”
The primary goal of the merger was to reduce Ethereum’s power consumption as cryptocurrencies come under fire for their massive carbon footprint. Blockchain power consumption has been reduced by around 99.95%, the developers say, which could tempt powerful institutional investors once constrained by environmental, social and governance (ESG) concerns.
The merger and future upgrades are also hurting the investment appeal of so-called “Ethereum killer” blockchains like Solana and Polkadot, said Adam Struck, CEO of venture capital firm Struck Crypto.
However, institutional investors are yet to jump in as a scary macro environment is cooling the waters of risk appetite.
In the longer term, however, the switch to PoS is expected to reduce the rate of issuance of ether tokens – potentially by as much as 90% – which should drive prices up.
Additionally, annual returns of 4.1% for staking ether tokens to validate transactions could prove tempting for investors.
However, while the proof-of-stake method enables these lucrative returns, many crypto purists point out that it takes Ethereum away from a purely decentralized model because larger validators could wield greater influence on the blockchain.
For now, however, the Ethereum world might be advised to take advantage of the Merge moment.
“There could be some volatility in the days ahead,” analysts at Kaiko Research said. “But for now, the community can take a well-deserved victory lap.”