The cryptocurrency market has its heart in a fist this Wednesday, when the estimated deadline for the Ethereum block chain to reach the conditions that allow it is finally met. migrate to proof-of-stake consensus model. The long-awaited event, known as ‘The Merge’, because it will effectively merge the main chain with the Beacon testnet, will be activated when the total terminal difficulty (TTD) reaches 58,750,000,000T, and from its success depends on the price action of ether (ETH).
First, there will be the ‘Paris’ update in the so-called execution layer – the ethereum mainnet – and 13 minutes later, Ethereum will abandon the current proof-of-work model, when a validator on the Beacon chain finalizes a block. The consensus layer, as this network is also called where all the developments for the ‘Merge’ have been taking place, will join the execution layer, which will complete the migration and the proof of work model will be deprecated for ETH.
This transition means that Ethereum will reduce your energy consumption by 99%, which arouses a great feeling of optimism among experts and investors, to the point that it is contemplated that the price of ether will eventually exceed that of bitcoin. But analysts believe that until this ‘flippening’ occurs, the road is long and not without risks.
To begin with, «‘The Merger’ is such a complex technical event, involving not just a large company, but an entire decentralized network, so there are reasons to think there may be problems,» says Marcus Sotiriou, an analyst at GlobalBlock. The vast majority of nodes have been updated and both the decentralized applications (DApps)What connection providers as important as Cloudflareas well as the crypto brokers they have closed ranks with the ethereum upgrade. However, there are other dangers.
«For example, many people in the ecosystem might not be ready to process the new string, since they have not updated their software. Also, some of the APIs could break in a way that many cannot predict,» Sotiriou details.
Julius Baer analysts believe that the best possible scenario for the ‘crypto space’ is for this event to play out as a «non-event», where «the protocol transition goes smoothly and without hiccups«, they indicate. «Any other result would probably cause a high volatility in the cryptocurrency space, not only in the price of ether», they add. And they cite as the investors have been shorting ETH futuresas a hedging mechanism against a failure of ‘The Fusion’.
WHAT TO EXPECT IN THE MEDIUM AND LONG TERM?
In general, the experts anticipate a choppy price action if ‘The Fusion’ fails, but many predictions point to price levels of at least $2,000 this month. The presumption is that the Ethereum blockchain will eventually fix all eventual setbacks and the transition will be over.
The long-term implications, thus, “will be hugely beneficial for Ethereum and the crypto space in generalSotiriou assures.
«With the climate crisis at the top of the global agenda, the fact that one of the largest blockchains being more environmentally friendly could lead to increased adoption rates«, they say from Foerex Suggest. This, «coupled with the fact that cryptocurrency mining will now be significantly more expensive for many, given the huge increase in energy prices in the last year, should cause some interesting movements in the cryptocurrency space in the coming months,» they say.
An investigation by Forex Suggest from earlier this year revealed that a single transaction on the Ethereum blockchain produced more than 93 pounds of CO2 emissions. This means that the total of the transactions carried out last year produced almost 22 million tons of CO2 emissions that would require 109.8 million trees to offset them. Therefore, if the power consumption is reduced by the predicted 99%, 108.7 million of those trees will be saved over the next year and CO2 emissions will be reduced to only 222,222 tons.
ESG narratives represent one of the biggest hurdles for institutional investors entering the cryptocurrency industry, “so ‘The Fusion’ could alleviate this concern and improve the reputation of the entire asset class», says the GlobalBlock expert.
ETH investors will also receive a return of around 5%. This means that the entire DeFi sector will flourish as investors will have a method to price risk. «Also, institutional investors love cash flow, so being able to receive a lucrative return is another advantage that heightens the appeal of ETH,» Sotiriou believes.
In short, the experts emphasize that ‘The Fusion’ will spur institutional interest in this asset class. They say it could be a catalyst for institutions to enter the cryptocurrency space en masse over the next 5 years.