Why Ethereum 2.0 will be the biggest HODL incentive for ETH investors

As the Ethereum "merger" is getting closer, the market's expectations for this upgrade have also been reflected in ETH. In just 10 days, ETH has soared from a price slightly above $1,000 to $1,650, an increase of more than 60%, and the next resistance target is locked at $2,000. It is not difficult to see from the strong upward trend of ETH that the current market demand is very strong, but as for whether the preset goals can be achieved in the later stage, we have to wait and see.

On the other hand, the rapid recovery of ETH also proves that the downside risk of the market is gradually fading. Investors have been looking forward to the recovery of the market for a long time and hope to set sail again with the help of the Ethereum update. Last week, "V God" Vitalik Buterin attended the Ethereum Community Conference (ETHCC) held in Paris and gave a speech on the progress of Ethereum merger and Ethereum's future roadmap, claiming that Ethereum can achieve a transaction processing capacity of 100,000 TPS after completing five key stages, which seems to give more and more investors hope.

If nothing unexpected happens, Ethereum will usher in the "Merge" on September 19, 2022, and perhaps a major update will be released as early as August. In recent months, the Ethereum community has been preparing for the transition of Ethereum. Once the Ethereum execution layer (current mainnet) and the beacon chain (new POS layer) are merged, ETH will become a deflationary asset (reduced issuance), and the energy consumption of "mining" will be greatly reduced by 99%.

In fact, the market recovery has shown that more and more investors are actively betting on ETH due to the fear of missing out. Survey data shows that in the past three months, the number of addresses with more than 100 ETH has been growing steadily, but at the same time, these addresses have occasionally sold ETH in the recent rebound cycle.

Frankly speaking, most investors bought ETH at a price lower than the current market price, so they have basically made a profit in the past three months, but this has increased the bullish pressure on ETH. Many people predict that the Ethereum "merger" will further boost the price of ETH (as shown in the above figure), and there will be no more declines like in the previous months.

Many indicators confirm that investors continued to hold a large number of ETH before the Ethereum "merger" and did not choose to sell it heavily during the rebound. This is because most investors are looking for medium- and long-term returns, rather than short-term games. At the same time, many ETH holders chose to stake their ETH before the "merger" came, which can be seen from the flow of ETH in the DeFi staking pool (as shown in the figure above).

Obviously, ETH's recent strong price trend reflects market demand to a certain extent. For ETH holders, no one will choose to sell their ETH when Ethereum is about to "merge" because it will mean giving up more potential upside. From this point of view, Ethereum's transition to "2.0" is undoubtedly the biggest HODL incentive for ETH holders.

However, from the current perspective, the price of ETH is still at a relatively low level, and the probability of rising to more than $2,000 before the end of July is still relatively high. Even if the expectation is not met in July, a large amount of demand will appear in August. It should be reminded here that we should never relax our vigilance against risks, and investors should still pay attention to the possibility of unexpected callbacks.