Bankless: Don't overlook Ethereum's merge, it hasn't been priced in yet
After the Ethereum merge, the daily issuance decreased from 12,000 to 1,280 ETH, and the daily selling pressure dropped from thousands of ETH to zero.Source: Bankless
Compiled by: The Blockbeats
Why will the merge happen in June, and what does it mean for ETH?
Three Months Until the Merge
SuperPhiz is an active member of the EthStaker and Rocketpool communities, and is more attuned to the details of the merge than anyone I know (except the developers themselves).
On the r/EthStaker subreddit, SuperPhiz outlined 5 indicators that the merge will happen in June.
The planned "difficulty bomb" is set to arrive in mid-June.
Danny Ryan stated that there is no need to delay the difficulty bomb.
The mainnet merge readiness checklist is nearing completion.
Developers are very picky about delays.
The Kiln testnet is testing the merge.
Unless some major unforeseen issues arise, the likelihood of seeing the merge in June is increasing.
June, which means only 3 months left.
The significance of this blockchain network upgrade is unprecedented, and it may be difficult for future projects to surpass it. Long-time Bankless readers and listeners certainly understand the importance of the merge and its imminent arrival. But I’m not sure if others in the crypto industry know, let alone the world outside the crypto space.
If Ethereum achieves its goal of becoming the global settlement layer for the metaverse, the Ethereum merge will become one of the most historically significant events of our time.
For most people, it doesn’t even require registration.
Just like many of us older folks recall the feeling of logging onto the internet via dial-up back in the day.
Our children will think it’s crazy to transact on Ethereum using 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 earn?" Fortunately, you can calculate this with this tool, and we’re here to teach you how to do it.
Most people think ETH will rise to $10,000 or even $20,000…
$10,000 is bearish.
$20,000 is FUD.
This is a reminder that you can have higher expectations.
ETH After the Merge
Currently, there are 10.5 million ETH staked on the beacon chain with a yield of a substantial 4.8% in ETH terms.
Once these 10.5 million ETH merge with the PoW Ethereum chain, the yield will rise from 4.8% to ~10-15%. Returns will increase by 2-3 times:
Incentives for holding ETH will increase by 2-3 times.
Incentives for staking ETH will increase by 2-3 times.
At the same time, the new issuance of ETH will decrease 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.
After the merge, PoS validators will earn 1,280 ETH per day, and there will be no reason to sell ETH to cover operational costs.
Our daily issuance will drop from 12,000 to 1,280 ETH, and the daily selling pressure will decrease from thousands of ETH to 0.
With the increase in yield, how much ETH will be staked? Since the significant regular selling pressure will be exhausted, where will ETH come from?
What will the price be? These answers will emerge in about 3 months.
Triple Halving Ends the Bear Market
A common belief among Bitcoin believers is that Bitcoin halving drives the cycles of the crypto market. Every 4 years, we have a bull market that starts with a Bitcoin halving. The reduction in Bitcoin issuance decreases the new supply flowing into the secondary market, and as the remaining liquidity supply of Bitcoin in the secondary market diminishes, the bull market gradually emerges.
If Bitcoin halving is indeed the reason for the crypto market cycles, then the significance of the Ethereum merge will be enormous.
Bitcoin halving reduces new Bitcoin supply by 50%.
Ethereum merge reduces new ETH supply by 90%.
The merge is humorously referred to as a "triple halving," because Bitcoin needs to undergo three halvings to achieve a similar scale of supply reduction.
Bitcoin takes 12 years to accomplish what Ethereum will do in the next 3 months.
If you believe that Bitcoin halving triggers bull markets, imagine what a triple halving would do.
The last Bitcoin halving was in May 2020, when the block reward per Bitcoin block dropped from 12.5 BTC to 6.25 BTC. At a Bitcoin price of $8,000, the halving eliminated $3.6 million in daily selling pressure, making it easier for prices to rise.
Ethereum currently produces about 12,000 ETH per day, or about $30 million in daily security costs. After the Ethereum merge, daily output will decrease by 10,720 ETH, while also eliminating the daily selling pressure of 1,280 ETH. Since stakers do not need to consume electricity, they do not have to sell their ETH earnings.
If eliminating $3.6 million in daily BTC selling pressure is enough to trigger a bull market, then what will happen when we eliminate $27 million to $30 million in daily ETH selling pressure?
I expressed my pessimism about the crypto market for the first time in last week's weekly summary, which surprised the audience.
For me, the commodity markets, geopolitical risks, inflation, nuclear war, and the disappearance of the upward momentum in the crypto market in 2021 are all bearish reasons.
I expect the crypto market to develop in a way that completely ignores the fundamentals of the merge, meaning the bear market will suppress all price performance, regardless of how bullish individual assets may be.
This means the merge has not yet been reflected in the price.
They do not understand its importance and do not see its arrival.
But you heard it here. So when ETH starts setting new ATHs after the merge, I will reshare this article's link and say: Bankless told you so.
