Why is Ethereum rising? -Forbes | Jewelry Dukan

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The long-awaited Ethereum (ETH) upgrade — commonly referred to as a merger — could be the most important event in the cryptocurrency markets this year.

The final phase of this massive upgrade of the leading altcoin network began on September 6th with the implementation of the Bellatrix upgrade. An upgrade that marks the transition from Ethereum’s proof-of-work mechanism to a proof-of-stake chain. When the US markets opened on September 6th, the price of ETH was up almost 4% to trade at $1,664.

“The merger is expected to take place around (Sept.) September 13-15. occur. What is happening today is the hard fork of Bellatrix preparing the chain for the merger,” Ethereum co-founder Vitalik Buterin tweeted on Sept. 5.

Despite the excitement about the merger, there is some last-minute jitters.

Some users worry that the Ethereum blockchain may fork after the merge. A fork is when a group of users runs a separate blockchain from the main blockchain. If Ethereum forks after the merger, it could affect liquidity as investors start withdrawing ETH tokens to exchange them for the fork tokens.

Aave (AAVE), a decentralized finance protocol, voted to stop lending cryptocurrency back on September 2nd. The Aave community feared that users might try to borrow too much Ethereum, which could affect the cryptocurrency’s liquidity.

Factors like these are leading some analysts to believe that the overall supply of Ethereum could fall as a result of the merger, which would increase the value of the cryptocurrency for those who already own it.

Why is Ethereum rising?

As the big upgrade approaches, Ethereum’s price has been slowly increasing.

Some enthusiasm for ETH is centered on the crypto’s prospects, with investors viewing the token as a way to buy and hold for future gains.

Ethereum surged to $2,000 in mid-August before heading lower with a brief selloff between August 25th and 29th. ETH prices fell during this period on news of some merger-related failures as well as the Federal Reserve Jackson Hole’s reiteration of at’s plans to fight inflation with higher interest rates.

Ethereum’s late summer rally followed its bottom on June 18 when ETH fell to its 52-week low of $880.

Between April and June, ETH was down more than 70%, falling below the all-important $1,000 mark in June.

Bitcoin (BTC) is down just 52% over the same period, bottoming at $17,708 in June. Since then, BTC has rallied about 12% to around $20,000. ETH is up more than 86% since its own bottom and has revived the $1,600 mark.

Ethereum merger price prediction

The merge has been in the works for years, but no one knows exactly how Ethereum 2.0 will pan out for users. Few changes of this magnitude have been attempted in the world of cryptography.

The merger aims to convert Ethereum from a proof-of-work protocol to a proof-of-stake one. The former uses crypto miners to add blocks to the blockchain, while the latter uses validators who stake ETH for a chance to expand the blockchain.

This conversion into Proof of Stake is achieved by merging Ethereum’s mainnet with the system’s beacon chain. This is a proof-of-stake chain that has been running on the Ethereum network since December 2020. The start of the Beacon chain was the first step in the merger.

The next step is Ethereum’s Bellatrix upgrade, which began on the morning of September 6th. The remaining step in the process, dubbed the Paris upgrade, should be implemented sometime around September 15th.

As long as nothing too disruptive happens during the upgrade process, many crypto insiders believe investors should expect positive returns as a result of the merger.

Updating an entire blockchain log under heavy usage remains a very difficult task. An estimated 1.3 million transactions take place on the Ethereum network every day.

Ben McMillan, co-founder and chief investment officer of IDX Digital Assets, says options markets are very optimistic about the merger. In the month leading up to the merger, ETH’s derivatives trading volume increased by 10%. The #2 cryptocurrency even surpassed Bitcoin in derivatives volume.

However, McMillan also says he is nervous that a “buy the rumum, sell the news” mentality might be at work, which could hurt Ethereum’s price in the short term after the merger.

If the merger goes smoothly, some investors could liquidate their positions after the implementation. After the merger, these investors might think they’ve already benefited from its value, and they might then sell their positions, causing a short-term price decline.

Anthony Scaramucci, founder and managing partner of global wealth management firm Skybridge Capital, told CNBC earlier this month that many traders are “likely to sell on news of the merger,” but warned against it, saying Ethereum is a great long-term investment.

Ethereum price history

In any case, the merger should have short-term effects on the price of Ethereum. Traders should monitor these developments closely. But the question for other investors will be where Ethereum will go in the long term.

Nobody can know exactly where the price of ETH will be by the end of the year. McMillan predicts that Ethereum will reach a price point “north of $2,000” before the end of 2022.

Obviously, this is a bullish price prediction and a handful of factors could affect it.

In addition to the merger, many crypto insiders believe that investors may want to consider macroeconomic factors such as inflation and cryptocurrency government regulations to guide their investment strategies for the rest of this year.

Cryptocurrencies have not proven to be the inflation hedge that some early Bitcoin adopters claimed. Instead, many cryptocurrencies, and ETH in particular, have started to move in tandem with risky stocks like the tech-heavy Nasdaq.

This means that macroeconomic factors like inflation could continue to put pressure on the overall price of ETH. In an inflationary environment, many investors will retreat to commodities like oil and gold and tend to be less interested in riskier investment vehicles like tech stocks and cryptocurrencies.

Many eyes are also turning to the US government and other international regulators for upcoming legislation, as regulations can drastically affect cryptocurrency prices.

Ethereum Volatility

Ethereum, like all cryptocurrencies, has proven to be a highly volatile asset, and rapid price swings can be triggered by the slightest bit of news.

ETH peaked at more than $4,600 in November 2021 and is now down more than 66% to around $1,600.

Although McMillan expects ETH to break the psychological barrier of $2,000 again before the end of this year, the cryptocurrency’s volatility can make it difficult to pinpoint these types of price predictions with any accuracy.

McMillan advises investors to consider cryptocurrencies like Ethereum, much like Nasdaq stocks did in the late 1990s. “Be aware of the short-term risks,” he says, but keep an eye on where you think the cryptocurrency will be in five to 10 years.

Of course, with any high-risk investment like cryptocurrency, investors should be aware of the risks and not invest more than they can afford to lose.

Ethereum and other cryptocurrencies are volatile, high-risk investments that can quickly change direction. Investors must always exercise due diligence and be prepared for the volatility of these investments.

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