Will the Ethereum merger drive a bull market? Let’s see what industry experts say

On August 25, Beijing time, the official website of the Ethereum Foundation released the "Main Network Merger Announcement" and officially confirmed the main network merger time and process. It is expected that the merger will be triggered when the mining difficulty reaches 587500000000000000000000, which is expected to be between September 10-20, 2022. The Ethereum merger is a milestone event in the crypto industry. Does anyone think that the Ethereum merger will bring a super bull market to the crypto market? Or is the Ethereum merger exaggerated and the bear market will continue? In response to these speculations, this article sorts out some industry big V's predictions and judgments on the future trend of the crypto market for readers' reference only.

Bear market end group: Crypto winter is over, Ethereum bull market starts after merger

Jiang Zhuoer of the Litecoin Mining Pool said earlier that ETH developers plan to merge ETH 2.0 on September 19, but it is normal for such large-scale software development projects to be postponed at the end of the year. The probability of merging in November and December is very high, which coincides with the convention of the end of the bear market decline at the end of the year (the bear markets in 2014 and 2018 both stopped falling at the end of the year), and ETH will be the leader to start the next bull market. The three major actual capital benefits after ETH 2.0: 1. ETH will reduce production by 90%. Think about it, a BTC halving will bring a big bull market, and a 90% reduction in production = 3 BTC halvings. 2. POS locked coins are expected to increase from the current 10% to 30% (according to the convention of other POS coins), and more coins will be locked. 3. Coupled with the EIP-1559 burning coins, the actual inflation will change from positive 2.0% to negative 1.8%, opening an unprecedented era of burning deflation in the currency circle.

Arthur Hayes, co-founder of BitMEX , said in a post: The attention brought by the merger will lead to higher prices. It is well known that a surge in the price of cryptocurrencies will attract more attention. Given that blockchain fundamentals such as users, developers, and on-chain activity are all related to attention, this will spiral into a virtuous cycle!

Edward Moya, senior market analyst at foreign exchange trading platform Oanda, believes that the cryptocurrency winter may be over. Despite the recent bad market news, some cryptocurrency investors have begun to buy more Bitcoin and other cryptocurrencies. Cryptocurrencies may not get out of the "choppy" waters in the next few months. However, if people's risk appetite for Bitcoin continues to grow, we may see a sharp rise in cryptocurrencies.

Bears continue to fight: Ethereum mergers are exaggerated, and the bear market will continue for longer

Selini Capital CIO Jordi Alexander : The Ethereum merger is indeed a bit exaggerated. Ultimately, the focus should shift to designing better applications, novel use cases for block space, and a more friendly on-chain user experience. (Note: Jordi Alexander made a detailed analysis of the "triple halving" theory, please refer to the previous article of Bitpush "Is the Ethereum merger over-hyped?")

Coinbase CEO Brian Armstrong said in an interview on August 24 that he expects the cryptocurrency winter to last about 12 to 18 months, but is also preparing for the possibility that it may last longer.

Glassnode posted: On the surface, on-chain transaction demand remains mediocre, Bitcoin blocks are partially vacant, Ethereum gas prices are at multi-year lows, and EIP1559 burn rates are at historic lows. The decline in network activity can be explained by the lack of new demand for the network from speculative traders and investors who have high confidence in network technology. The additional demand needed to maintain further price increases is not visible at present. Glassnode calls the steady decline in active addresses a "low bear market demand condition," which has basically existed since December last year. However, early signs of recovery in SOPR profitability are encouraging. Attention can now be turned to whether these upward trends can continue and improve, as a measure of whether this is a simple bear market relief or a more constructive structural shift.

Monetary cycle predictions of traditional financial institutions

There are many factors that affect crypto assets such as Bitcoin. From recent observations, the correlation between the US stock market and the crypto market trend is getting higher and higher. The impact of financial policies such as the Federal Reserve on the crypto industry is also increasing. The future trend of crypto assets is also related to the cyclicality of the traditional financial market in the United States, which has gradually become one of the important indicators for predicting the future trend of crypto assets. At the end of this article, we selected the predictions and analysis of traditional financial institutions on the US stock market and the future policies of the Federal Reserve.

Wells Fargo analysts predict that the Federal Reserve will raise interest rates by 75 basis points for the third time in a row in September, further boosting the dollar. The dollar is likely to peak in the fourth quarter and begin a "cyclical decline" against most major currencies in 2023. The United States will fall into recession in early 2023, and a sharp economic slowdown will prompt the Federal Reserve to slow the pace of monetary tightening and start cutting interest rates before the end of next year.

Deutsche Bank economist David Folkerts- Landau and others said: As the Federal Reserve raises interest rates to deal with high and rising inflation, the United States will fall into recession next year. It is expected that by the end of next year, the Fed will reduce its $8.9 trillion balance sheet by nearly $2 trillion, which is equivalent to three to four 25 basis point interest rate hikes.

Economists surveyed by Bloomberg expect the Fed to raise interest rates by another 25 basis points in early 2023, bringing the rate to a peak of 3.75%, and then stop raising interest rates and start cutting interest rates before the end of the year. In addition, the Fed will eventually accelerate the reduction of its balance sheet, eventually reaching $1.1 trillion per year. By the end of the year, the balance sheet will drop to $8.4 trillion, and by December 2024, it will drop to $6.5 trillion.