It bears several long-term advantages for the “cryptos,” according to experts.
The market for cryptocurrencies is happy. The Ethereum blockchain was supposed to meet the prerequisites necessary for its transition to the proof-of-stake consensus architecture by this Thursday, September 15, but that deadline has now passed. When the main chain and the Beacon test network reached the total terminal difficulty (TTD) 58,750,000,000T, the anticipated event—called as “The Fusion” (also known as “The Merge”)—was activated and carried out successfully. Although there are questions about whether ether (ETH) will serve as the spark for the next bull run, the price action of ETH is little affected by the news.
First, the “Paris” upgrade has been released on the Ethereum mainnet’s “execution layer,” and 13 minutes later, Ethereum has renounced its previous proof-of-work paradigm. The execution layer has joined the consensus layer, or “consensus layer,” as this network is often known, where all the advances for the “Merge” have been taking place. This has completed the migration and rendered cryptocurrency mining for ETH useless.
This change implies that Ethereum starts to consume 99% less energy, which inspires enormous hope among investors and professionals to the point that it is predicted that the price of ether would eventually surpass that of bitcoin. Analysts, however, contend that the path ahead is difficult and fraught with danger until this “flippening” takes place.
First off, “‘The Merger’ is such a difficult technical event, involving not only a big firm, but an entire decentralized network, so there are reasons to anticipate there may be problems,” says Marcus Sotiriou, an analyst at GlobalBlock. Most nodes have been updated, and cryptobrokers, decentralized applications (DApps), and crucial connection providers like Cloudflare have all joined forces with the ethereum update. There are other risks, though.
For instance, because they haven’t upgraded their software, many members of the ecosystem might not be able to handle the new string. Additionally, some APIs may malfunction in a way that is difficult to anticipate, according to Sotiriou.
The ideal outcome, according to Julius Baer analysts, is for this event to play out as a “non-event,” where “the protocol change occurs easily and without any glitches,” they write. They continue, “Any other result would probably result in more volatility in the cryptocurrency space, not just in the price of ether.” They also point out that investors have been selling short ETH futures as a form of insurance against the failure of “The Fusion.”
WHAT MAY HAPPEN MID- AND LONG-TERM?
If “The Fusion” fails, analysts generally anticipate tumultuous price movement, although many projections indicate $2,000 price levels as early as this month. The transition is assumed to be over after the Ethereum blockchain has fixed all potential problems.
According to Sotiriou, the long-term effects “will be enormously positive for Ethereum and the crypto industry in general.”
According to Foerex Suggest, “With the climate problem at the top of the international agenda, the fact that one of the main blockchains is more environmentally friendly could lead to an increase in adoption rates.” These factors “could ignite some intriguing changes in the ‘crypto’ field in the coming few months,” they claim, “combined with the reality that cryptocurrency mining will now be substantially more expensive for many, given the large jump in energy prices in the last year.”
In particular, an earlier this year research by Forex Suggest found that a single transaction on the Ethereum blockchain resulted in more than 42,1841 kg of CO2 emissions. Accordingly, the total amount of transactions made last year resulted in about 22 million tons of CO2 emissions, which would take 109.8 million trees to counteract. Therefore, 108.7 million of those trees will be spared over the course of the following year and CO2 emissions will be decreased to just 222,222 tons if energy use is cut by the anticipated 99%.
The GlobalBlock specialist stated that ESG narratives are one of the main barriers for institutional investors to enter the cryptocurrency market, “therefore ‘The Fusion’ might allay this worry and enhance the reputation of the entire asset class.”
A return of about 5% will also be given to ETH investors who take part in transaction validation and lock their ether for that reason. Because investors will have a way to price risk, the entire decentralized finance (DeFi) industry will prosper. Additionally, institutional investors adore cash flow, so the ability to earn a sizable return is another benefit that increases the attraction of ETH, according to Sotiriou.
The Fusion, in summary, will increase institutional interest in this asset class, according to experts. According to them, it might serve as a trigger for institutions to invest heavily in cryptocurrencies over the course of the next five years.
