Bankless: Don’t Ignore Ethereum Mergers That Haven’t Been Priced In

Why did the merger happen in June and what does it mean for ETH?

Three months until the merger

SuperPhiz is an active member of the EthStaker and Rocketpool communities, and has paid more attention to the details of the merge than anyone I know (besides the developers themselves).

Over on the r/EthStaker subreddit, SuperPhiz detailed five signs that the merger will happen in June.

1. The planned “difficulty bomb” is due to arrive in mid-June.

2. Danny Ryan says there is no need to delay the difficulty bomb.

3. The mainnet merge preparation checklist is almost complete.

4. Developers are picky about latency.

5. The Kiln testnet is testing the merge.

Barring some major unforeseen issues, it is increasingly likely that we will see a merger in June.

June.

That means there are only 3 months left.

The magnitude of this blockchain network upgrade is unprecedented and will be difficult to surpass. Long-time Bankless readers and listeners certainly know the magnitude of the merger and that it’s coming. But I’m not sure the rest of the crypto industry knows , let alone the world outside of crypto.

If Ethereum achieves its goal of becoming the global settlement layer of the Metaverse, the Ethereum merger will be one of the most historic events of modern times.

But for most people, it doesn’t even require registration.

Just like how many of us of an older generation recall the days of logging onto the internet via dial-up.

Our kids will think it’s crazy to conduct transactions on Ethereum which still uses PoW consensus.

One of my hobbies is daydreaming: “If $ETH is priced at $x and the staking yield is x%, how much annual income will I make?” Luckily, you can do the math, and we’re here to teach you how.

Most people think ETH will go to $10,000 or even $20,000…

$10,000 bearish.

$20k is FUD.

This is a reminder not to have too high expectations.

Merged ETH

Currently, there are 10.5 million ETH staked in the beacon chain, and the yield calculated in ETH currency has reached a considerable 4.8%.

Once these 10.5 million ETH are merged with the PoW Ethereum chain, the yield will rise from 4.8% to ~10-15%. The return has increased by 2-3 times :

1. The incentive for holding ETH has increased 2-3 times.

2. The incentive for staking ETH has increased 2-3 times.

At the same time, new ETH issuance decreased by 90%.

Currently, retail PoW miners earn 12,000 ETH per day and are forced to sell a large portion of it to pay for electricity costs.

After the merger, PoS validators will earn 1,280 ETH per day and have no reason to sell ETH to cover operating costs.

Our daily issuance has been reduced from 12,000 to 1,280 ETH, and daily selling pressure has dropped from thousands of ETH to 0.

How much ETH will be staked due to the increased yield? Where will the ETH come from now that a lot of the regular selling pressure will dry up?

What is the resulting price?

The answers will be available in about 3 months.

Triple halving ends bear market

A common belief among Bitcoin believers is that Bitcoin halving is what drives crypto market cycles. Every 4 years, we have a bull run that starts with Bitcoin halving. The reduction in Bitcoin issuance reduces the amount of new supply flowing into the secondary market, and as the remaining Bitcoin liquidity supply in the secondary market dries up, a bull run gradually emerges.

If Bitcoin halving is truly responsible for crypto market cycles, then the significance of an Ethereum merger would be enormous .

1. The Bitcoin halving reduces the supply of new Bitcoins by 50%.

2. The Ethereum merger reduced the new ETH supply by 90%.

The merger has been dubbed the “triple halving” because Bitcoin would need to go through three halvings to produce a supply reduction of the same size.

It will take Bitcoin 12 years to accomplish what Ethereum will do in the next 3 months.

If you believe the idea that Bitcoin’s halving will spark a bull run, imagine what will happen with a triple halving.

The last Bitcoin halving was in May 2020, when the reward for each Bitcoin block changed from 12.5 BTC per block to 6.25 BTC per block. At a Bitcoin price of $8,000 per block, the halving eliminated $3.6 million of daily selling pressure on Bitcoin, making it easier for prices to rise.

Ethereum currently produces about 12,000 ETH per day, or about $30 million in security costs per day. After the merger, Ethereum's daily output will be reduced by 10,720 ETH, while also eliminating the selling pressure of 1,280 ETH per day . Since stakers do not need to consume electricity, they do not have to sell their ETH proceeds.

If eliminating $3.6 million in daily BTC selling pressure is enough to trigger a bull run, what would happen if eliminating $27 million to $30 million in daily ETH selling pressure were eliminated?

I first expressed my pessimism about the crypto markets in last week’s weekly roundup, much to the surprise of my audience.

Commodity markets, geopolitical risks, inflation, nuclear war, and the disappearance of the crypto market's 2021 upward momentum are all reasons to be bearish for me.

I expect crypto markets to evolve in a way that completely ignores the consolidated fundamentals, i.e. the bear market will suppress all price performance, no matter how bullish the individual assets are.

This means that the merger is not reflected in the price.

They don’t understand its significance and they don’t see it coming.

You heard it here. When ETH starts setting new ATHs after the merger, I will repost the link to this article and say:

Bankless told you.

Original title: Don't sleep on the merge [LITE]

Original source: Bankless HQ Newsletter

Original author: David Hoffman

Original translation: 0x711, BlockBeats