Note: Nothing in this article should be considered investment advice. Readers adopt the perspectives in this article at their own risk.
2022 has been a rough and surprising year for crypto enthusiasts. After a bull run in 2021, crypto markets entered a bear market. The market was made even more brutal by the crypto winter that brought crypto lenders and a few cryptocurrencies to bankruptcy court.
The most anticipated and exciting news of 2023 been the Merge. The Merge has been planned for years, slowly implemented in stages, and is a historic turning point in the crypto and blockchain world.
Also Read: The Best Ethereum Wallet
- What is the Merge?
- Benefits of the Merge
- Risks of the Merge
- Ethereum Price Performance in Early 2023
- Ethereum Price Performance Before the Merge
- Post-Merge ETH Price Performance
- Ethereum Price Prediction for Q4 2023
- Key Takeaways
What is the Merge?
The Merge is the name given to the final transition of the Ethereum blockchain from Proof of Work (PoW) to Proof of Stake (PoS). The transition had to be carefully planned and executed because Ethereum handles 94% of crypto transactions and over 90% of transactions involving non-fungible tokens. Moreover, it is the second-highest market cap in the blockchain world.
Ethereum is the standard creator and setter for all blockchains that handles smart contracts, decentralized finance, NFTs, blockchain gaming, and a myriad of other services currently provided by Ethereum and Ethereum compatible blockchains. Further evidence of Ethereum’s domination of the crypt world is that most tokens are ERC compatible. ERC is the designation used for the code written to support Ethereum’s native token, Ether (ETH). In addition, as the ERC programming evolves, other blockchains adopt it or create their own coding that is compatible with it.
The economic power and influence of the blockchain and its community over the industries that it created means that its disruption, failure, or corruption could not only cost the crypto industry billions of dollars but also result in a massive exodus of funds from the market. Fear of investors fleeing the crypto market is further antagonized by an evolving global recession, high inflation rates, quantitative tightening in the USA, and the economic devastation caused by the crypto bear market and crypto winter.
Benefits of the Merge
Ethereum transitioned from proof of work to proof of stake because it could not compete with newer blockchains and scale as a PoW blockchain. Its PoW consensus algorithm was energy intensive, expensive, slow, and caused its transaction fees (also known as gas fees) to be very high.
Ethereum 2.0, the proof of stake version of the blockchain, will have transaction speeds of about 100,000 transactions per second, have cheaper transactions, less traffic congestion, use substantially less energy and employ fewer people at much less cost to process, verify, and confirm blockchain transactions.
Risks of the Merge
Despite the advantages conferred by the Merge, there are crypto observers who predict that Ethereum prices will decline, Ethereum holders will sell off their assets in a panic, and, overall, forecast the demise of the Ethereum network.
One concern is that, unlike Ethereum, Ethereum 2.0 will not be special. It will be just another PoS blockchain. Therefore, rival blockchain will gain market share as its proponents see less value in the blockchain.
Another concern is that the PoW fork, ETHW Core, created after the Merge will create havoc in the Ethereum community and jeopardize Ethereum 2.0’s long-term success.
Finally, Ethereum price prediction has ranged from overly optimistic valuations to discouragingly pessimistic ones. Ethereum’s price in a volatile market is affected by a myriad of factors with no connection to the real world. Moreover, its market price heavily depends on the demand for it. There is really nothing else supporting its valuation. So, it is the sentiment and beliefs of crypto enthusiasts, institutional investors, and its community that are key to it maintaining its valuation, demand, and level of market domination.
Ethereum Price Performance in Early 2023
In Q1 and Q2 of 2023, the ETH price sharply declined, just like the prices of Bitcoin (BTC) and the altcoins. During the crypto winter, the ETH price slid even lower. The downward trend was the result of altcoins losing money rapidly, crypto lenders going bankrupt, and general alarm and fear in the crypto world.
ETH prices were supported by the burgeoning NFT market and its new product, NFT collectibles. NFT collectibles were selling for millions of dollars. Most of those transactions were done on the Ethereum blockchain.
Also Read: What Makes an NFT Valuable?
Ethereum Price Performance Before the Merge
In July 2023, ETH price dropped to US$880, a significant drop from its High in November 2021 of US$4,800. Ethereum’s price increased a month before the Merge. The Merge was planned for 15 September 2023. The excitement of the Merge and quick future profits that could be made from it led to a push to buy Ethereum.
Unfortunately, the ETHW Core fork which was scheduled to be launched after the Merge caused some to fear that Ethereum 2.0 might fail or be less lucrative than anticipated. The last major fork off of Ethereum’s blockchain led to the creation of Ethereum 1.0 and Ethereum Classic (the original Ethereum blockchain). As we all know, Ethereum Classic did not perform as expected after the fork. It was immediately overshadowed by Ethereum 1.0 and has remained so ever since that time.
Post-Merge ETH Price Performance
Immediately after the Merge, the ETH price increased. Two days after the Merge, the ETH price fell. Its market valuation continues to fluctuate with no clearly defined trend. This lack of clear direction has led to some conflicting investment advice.
The majority of crypto experts and observers have assessed Ethereum 2.0’s future by using technical and fundamental analysis. Since it is a first mover, key innovators, dominates the crypto world in transactions created and hosted by its blockchain, and is key to the NFT industry, it’s got a strong foundation and technical support.
Furthermore, the blockchain handles a variety of complex instruments, is key to the operation of cryptocurrency markets, highly liquid, and is part of a large number of blockchain networks. Plus, it is still the preferred platform for developers who want to launch decentralized applications, and is a good investment for people who practice a green investment strategy.
Ethereum Price Prediction for Q4 2023
The majority of crypto market insiders expect Ethereum’s price to range from US$4,000 to US$6,500 by the end of 2023. The most dismal predictions expect it to fall to US$500. Nevertheless, they all agree that by the end of 2023, the Ethereum price will be in the US$6,000 range. Over the next 2 to 5 years, industry analysts expect that the Ethereum price will continue to increase by triple digits.
The Ethereum price, like other cryptocurrency prices, has high volatility, is unpredictable, and past performance is not a predictor of future performance. Many investors expect an Ethereum bull run in the future. These expectations are supported by its current industry standing, financial situation, and other factors. Still, investors must stay informed and make the best decisions for themselves and their portfolios. Ethereum could surpass Bitcoin in valuation, maintain its market position, or slip into obscurity.
Right now, the answer to the question, “why is Ethereum going up?” is its technology with a first mover advantage that is key to the industry and has evolved to be more competitive than its rivals.
What is the difference between Bitcoin and Ethereum?
Bitcoin is the first cryptocurrency ever released to the public. It stores value but has limited use. As Bitcoin rises in value, its uses become even more limited because the total Bitcoin available is capped.
Ethereum was capped, but after the Merge it is no longer capped. ETH2, the native token of the Ethereum 2.0 blockchain, is not capped, and it is considered a transactional cryptocurrency. It is a medium of payment and can be used to store value.
What is the difference between ETH and ETH2?
ETH is the native token of the Ethereum (1.0) blockchain., and it has a maximum number of tokens. ETH2 is the native token of the Ethereum 2.0 blockchain, and its token supply is not capped. Also, yes, Ethereum holders can convert their ETH to ETH2 and vice versa.
Why is an Ethereum price prediction unreliable?
An Ethereum price prediction is affected by a large number of macroeconomic factors that are unknown. Since Ethereum is not tied to the real world, there are no real world assets or events that we can look at to predict the future Ethereum price. So, an Ethereum price prediction is just someone’s guess about what might happen i the future.
What is the Beacon blockchain?
The Beacon blockchain is the blockchain that was combined with the Ethereum (1.0) blockchain to convert Ethereum to a proof of stake consensus algorithm.
How will Ethereum 2.0 process 100,000 transactions per second?
Ethereum 2.0 will use sharding to speed up its execution of transactions. With sharding, there are side chains that process transactions for the main blockchain and then return the transactions to the main blockchain after they have been processed and recorded by the side chain. These chains will reduce congestion on the main blockchain and reduce transaction fees. Sharding will be added to Ethereum 2.0 in 2023.