Since The Ethereum Merge occurred this recent week, thus marking one of the most relevant events in the history of cryptocurrencies and technology, Nathan Tompson, the technical tech writer at Bybit has decided to share with Cointelegraph en Españolsome answers to the most relevant topics about the new Ethereum update.
Although, Thompson firstly highlights that The Merge is a software update on the Ethereum blockchain, which is expected to be converted from now on into a much more secure and energy efficient blockchain.
Will The Merge Accelerate Ether Institutional Adoption?
According to Thompson, Within the crypto tradition, there is a great event that has been predicted for a long time: the arrival of “the institutions”, such as pension funds, corporate treasuries, and even sovereign wealth funds. In this sense, he claims that some of these entities have already started to accumulate crypto, however, there are many more that are still on the sidelines.
Those entities that hold crypto assets, including ETFs in Canada, Fidelity Investments, and the nation of El Salvador, have focused on Bitcoin (BTC). According to Coindesk, BTC, the largest cryptocurrency by market cap, is the gateway, and indeed the only stop, for many institutions that have ventured into the cryptocurrency market. “As of June 2022, 6.47% of all Bitcoin that will ever exist is held by institutions”they mentioned.
That said and after The Merge, Thompson mentions that an important question arises which he himself answers, Will institutions also buy Ether (ETH)? “In our August report in partnership with Nansen, Bybit analysts concluded that there was no consensus among surveyed smart money and institutional investors regarding their attitude towards short-term trading around The Merge. Instead, our analysts found that “smart money” wallets (which include institutions and market makers) were more likely to hoard ETH with the intention of holding it for the long term.answered.
“It is necessary to take into account that the wallets we surveyed are already active in the crypto markets. As for the rest of the institutions, if their Bitcoin investments pay off, it won’t be long before they look at another crypto asset.”he added.
How long will it take for ETH to become deflationary?
On this question, Thompson has said, that since the implementation of the EIP-1559 proposal in August 2021, Ethereum has been burning a part of its ETH transaction fees. However, due to the large amount of ETH being issued to pay miners for securing and validating the network, even with burning, the ETH supply was still slightly inflationary in the last 12 months, according to data from the website. ultrasound.money.
“The Merge changes that by drastically reducing the amount of ETH issued while keeping the rate of consumption in a similar range. Ethereum researcher Justin Drake has developed a model that estimates three different scenarios for ETH supply after the merger”Thompson mentioned.
According to him, taking into account Drake’s most conservative calculations, the blockchain will need to issue a maximum of 963,000 ETH per year to pay the validators that secure and manage the network, bringing the annual fee burned to 1.5 million ETH. “Ultrasound.money Suggests ETH Supply Will Soon Become Deflationary By 1.5% Per Year”he pointed.
“These figures will have to be taken with a grain of salt, as they are based on average network charges over the last 12 months, which have been significantly higher than they are today. Given that macroeconomic headwinds are still forecast to hold, it may take a while for Ethereum to manifest these predictions.”he highlighted.
Will ETH ever overtake BTC as the largest cryptocurrency by market cap?
Lastly, regarding this question, which has been discussed for so long in crypto circles and has been labeled under its own name as: “the flippeningThompson suggests that The Merge is just one of a series of planned upgrades for Ethereum. And if all are successful, the power of the future network could change Bitcoin.
“That success is still hypothetical at this point, so I wouldn’t bet my house on it. To reassure ourselves, let’s take a look at some historical data: if we compare the market capitalization of ETH with that of BTC, it is clear that recently ETH has been moving strongly against the dominance of BTC”he stated.
“On the other hand, historically we have seen ETH make very strong moves against BTC, but each time it has been in the 50-55% range, which is where we are today. Whether “this time is different” or not, as they say, is up for debate.”concluded Thompson about it.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
It may interest you:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.