Ethereum, the most popular altcoin and the second largest cryptocurrency by volume, completed its long-awaited merger on Thursday.
After years of being the number one smart contract blockchain, Ethereum is the network upgrade that will move Ethereum to a less energy-intensive technology. You may have heard of the planned updates as Ethereum 2.0 or Eth2, but the Ethereum Foundation has been calling it “Ethereum Merge” for months.
Industry experts have been closely monitoring every step leading up to the update, predicting that it could significantly change the value of the second largest cryptocurrency. Ethereum’s price fell below $1,500 on Thursday morning in the hours following the completion of the merger. Along with this week’s merge, next week’s Federal Reserve meeting could bring fresh volatility to Ethereum’s price, with another federal rate hike expected.
How will the Ethereum merger affect your crypto investments?
Some experts say the update could boost Ethereum’s growth after new blockchain projects ate away at its market share over the past six months.
“I believe that post-merger, we’re going to see a positive reaction in the markets,” YouTuber and crypto educator Hashoshi said on an episode of his Crypto Over Coffee podcast earlier this year.
That’s because the Ethereum merger could speed up processing and provide more security and stability, as well as a 98% or more reduction in Ethereum’s energy consumption, Hashoshi said.
Related altcoins could see price growth with this upgrade, says Armando Aguilar, an independent crypto analyst and former digital asset strategist at Fundstrat Global Advisors.
“The positive momentum will be for the projects built on Ethereum like Polygon, Arbitrum… and many others,” he says. Meanwhile, competing protocols like Solana and Polkadot could face additional pressure from the Ethereum ecosystem as the upgrade will allow the network to scale, reduce transaction costs and attract additional blockchain technology adoption.
Do investors have to do anything with their tokens?
The Ethereum website says current ETH holders don’t have to do anything in light of the merger.
“It’s like a software upgrade,” says Doug Boneparth, financial advisor and president of Bone Fide Wealth.
How should you change your investment strategy?
There’s no reason to do anything while things are unfolding. It will take a while to get everything set up and other factors such as increased regulation could impact Ethereum and other cryptos during this time.
“When you invest in Ethereum or any type of blockchain technology, you are investing in something that is still in its infancy,” says Boneparth. “You need a long-term time horizon to see how things develop. I really don’t think people who own Ethereum should be doing much at this point.”
Instead, this is a great moment to deepen your knowledge of crypto and blockchain technology, says Boneparth. “If you are not an investor and are curious, this is a great educational moment. If you’re an investor and you still don’t get it, this is a great moment to educate yourself and learn,” he says.
The fact that there is an upgrade and that blockchain transactions continue to grow says a lot about the direction this is all going, notes Boneparth. “And it’s never, never, never too late to learn it,” he says. “And that could very well give you an edge or decide to invest in crypto or any other cryptocurrency.”
With any crypto investment, financial planners warn against never holding more than 5% of your portfolio in cryptocurrency. You should also prioritize paying off debt and topping up your emergency fund rather than investing in crypto, no matter how tempting it may be to ride the wave. Above all, experts say that you should not invest more than you would lose since crypto is such a young and speculative asset class.
Should you still have room for some risk given these factors, Ethereum could be a decent bet. Along with Bitcoin, experts consider Ethereum to be one of the safest crypto investments even before the merger could prompt a return in prices closer to the all-time highs reached in late 2021.
Ethereum’s price has fallen more than 35% since its all-time high in November 2021 and trading volume has leveled off. And some optimistic investors are predicting that Ethereum’s price will surge above $10,000 in the coming years.
“Following this recent price drop, it might be wise for investors who have an appetite to be in the space to allocate additional capital – based on their tolerance and free money – so they can invest in this digital asset,” says Aguilar.