The long-awaited integration of Ethereum, the most popular altcoin and second-largest cryptocurrency by volume, was finally accomplished on Thursday.
After dominating the smart contract blockchain market for many years, ethereum will switch to a less energy-intensive technology as a result of the network update. The Ethereum foundation has been calling the upcoming improvements “Ethereum Merge” for months, even if you may have previously heard of them as Ethereum 2.0 or Eth2.
Industry analysts have been keenly monitoring each development leading up to the upgrade because they believe it might materially change the value of the second-largest cryptocurrency. In the hours following the merger’s conclusion on Thursday morning, the price of Ethereum fell below $1,500. Along with the merger this week, next week’s Federal Reserve meeting, which is anticipated to result in another federal interest rate rise, might cause further volatility in the price of Ethereum.
What is The Merge?
The long-awaited “Merge upgrade” is Ethereum’s transition to a “Proof-of-Stake” consensus mechanism from its existing “Proof-of-Work” system. The Bellatrix & Paris upgrades are the two steps through which The Merge really occurs. Bellatrix gave The Merge its formal start on September 6, 2022, at 11:34:47 UTC. A consensus layer network improvement is Bellatrix. Paris, the execution layer that will change Ethereum from proof-of-work to proof-of-stake, will come after Bellatrix.
The Terminal Total Difficulty (TTD), a certain Total Difficulty barrier, will cause Paris to start, although the precise date is still uncertain because it strongly depends on the proof-of-work hash rate. The total difficulty threshold for the last block to be mined in Ethereum is known as TTD. TTD stands for the set amount of hashes that must still be mined before Proof-of-Stake officially replaces it.
What takes place right after The Merge?
Once finished, Ethereum’s traditional Proof-of-Work paradigm will be permanently retired and the Beacon Chain will take over the function of verifying new transactions using Proof-of-Stake. Over 13 million ETH have already been staked on the Beacon Chain by validators. The whole transaction history of Ethereum, including each transaction, smart contract, and balance from July 2015, will be combined once the mainnet (the main network of the Ethereum blockchain) merges with the Beacon Chain.
What makes The Merge significant?
Due to the possible material and philosophical ramifications, The Merge, which has been six years in the making, is seen by many as a turning point in the history of cryptocurrencies. After months of market instability brought on, among other things, by inflation and increasing interest rates, this milestone may help boost market confidence and infuse some much-needed optimism. A merging like this is an extremely unusual event in crypto, and may never happen again, as one commenter put it, “proving that a decentralized and permissionless network can operate in an energy-efficient manner.”
What Effect Will the Ethereum Merger Have on The Cryptocurrency Investments?
According to some analysts, the upgrade might help Ethereum expand again after other blockchain initiatives reduced its market share during the previous six months.
In an episode of his podcast “Crypto Over Coffee” from earlier this year, the YouTuber and crypto educator Hashoshi stated, “I do believe that we will see a favorable reaction in the markets post-merge.”
That’s because, according to Hashoshi, the Ethereum merging might reduce Ethereum’s energy usage by at least 98% while also enhancing security and stability and speeding up processing.
According to Armando Aguilar, an independent cryptocurrency expert and former digital asset strategist at Fundstrat Global Advisors, related cryptocurrencies may experience a price increase as a result of this update.
According to him, “the good momentum will be for those projects that are built on top of Ethereum,” among them are polygon and arbitrum. The Ethereum ecosystem, which will enable the network to expand, reduce transaction costs, and encourage further use of blockchain technology, may put extra pressure on rival protocols like Solana and polkadot.
Should Investors Take Any Action With Their Tokens?
The ethereum website say current ETH holders don’t need to do anything in light of the merge.
“It’s like a software upgrade,” says Doug Boneparth, a financial advisor and president of Bone Fide Wealth.
What changes should be made to your investment plan?
You shouldn’t take any action while events unfold. It will take some time for everything to come into place, and during this period, additional variables like increased regulation may have an impact on ethereum and other cryptocurrencies.
According to Boneparth, if you invest in ethereum or any other type of blockchain technology, you’re doing it in a nascent market. “To watch how things develop, you’ll need a long-term time perspective. Owners of ethereum shouldn’t be doing too much, in my opinion, at the moment.
Instead, according to Boneparth, now is a fantastic time to brush up on your knowledge of cryptocurrency and blockchain technology. “If you’re inquisitive but not an investor, this is a terrific opportunity for education.
It’s a perfect time to educate yourself and learn if you’re an investor and you still don’t understand,” he advises.
According to Boneparth, the fact that there has been an update and that blockchain transactions are continuing to rise tells a lot about the direction in which everything is moving. And learning is never, ever, ever too late, he adds. And it can very well provide you a competitive advantage or influence your decision to invest in cryptocurrencies or any other coin.
Financial advisers advise against holding more than 5% of your portfolio in cryptocurrencies for any investment. No matter how tempting it may be to ride the wave, you should put paying off debt and building up your emergency fund ahead of investing in cryptocurrencies. Experts advise against investing more money than you can afford to lose because cryptocurrency is such a new and risky asset class.
Ethereum could be a good investment if you still have room for some risk in light of these circumstances. Even before the merger may cause prices to recover to levels more closely like the all-time high it reached in late 2021, experts already rank Ethereum alongside Bitcoin as one of the safest crypto investments.
Since hitting an all-time high in November 2021, the price of ethereum has decreased by more than 35%, and trading activity has slowed. Additionally, some bullish speculators forecast that over the next few years, the price of ethereum would increase to over $10,000.
According to their tolerance and available cash, it would be a good idea for investors who are interested in the field to deploy some extra capital after this most recent decline in prices in order to participate in this digital asset, advises Aguilar.
How will The Merge affect the price of Ethereum?
That is now an open question. Traders have predicted that prices might go in either direction; some predict a rise in prices, while others predict a decline. What is evident is that, even after taking into consideration the possibility of a deflationary monetary policy and increased developer activity on the blockchain, the market prognosis for ETH post-Merge is not especially clear cut.
The overall token supply may fall after network activity and the anticipated 90% decline in ETH issuance are taken into account. However, it’s not clear how much or whether Ethereum has already factored in that information. Furthermore, if current miners branch a Proof-of-Work chain from Ethereum’s mainnet, things may become more difficult.
Will ETH instantly transform into ETH 2? Is Ethereum 2.0 going to be a new coin?
There won’t be any distinction between ETH 1 and ETH 2 after The Merge, which are now known as the execution layer and the consensus layer, respectively.
Moving future, there will only be one Ethereum. The idea that Ethereum 2.0 is a brand-new currency or its own asset is untrue. Your current ETH will continue to work just as it did previously since it is not. The Merge will not have an impact on it.
