Ethereum: Is the Merge Underrated or Priced in?

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  • GlobalBlock analyst Marcus Sotiriou talks about the Ethereum merger, its benefits and potential risks to the event.
  • He says the yield factor and a 99.95% reduction in energy use could make DeFi thrive and boost investor interest.
  • But it is a ‘complex technical event’ that.

Is the merger underestimated or is it priced in? According to crypto analyst Marcus Sotiriou, it could be a crucial question for investors as crypto enters a pivotal week for crypto.

The countdown to Ethereum’s most anticipated event – the Merge – takes up to hours. And despite the price fluctuating below $1,750 after last week’s setback, there is still optimism that the big event will succeed.

Or will it?

Is it underestimated or priced in?

We saw ETH price rise in the days following the merger date announcement before the momentum died out along with the rest of the crypto market.

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But the price continues to struggle, currently hovering around $1,730 since last week’s dip. For investors, one of the questions to consider before entering the event is whether the ETH merger has already been priced in or whether the market has underestimated its potential impact.

Here’s something to remember about the merge.

The advantages

Sotiriou, an analyst at digital asset broker GlobalBlock, says the merger will undoubtedly “the most impactful event to date in the crypto industry.”

The benefits of the changes are there. For example, a 99.95% reduction in network energy consumption is great for the ESG story. In short, it helps remove one of the hurdles to greater institutional interest in ETH and the wider ecosystem: concerns about crypto mining and its energy consumption.

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Another long-term implication the analyst sees is the 5% return for ETH investors and its impact on the broader DeFi space. Knowing how risks are priced in based on returns will benefit not only retail DeFi, but institutional investors as well.

“Institutional investors like cash flow,” he noted in the note, “so being able to receive lucrative returns is another attractive perk that could make ETH more investable for them.”

A ‘complex technical event’ – economical but with risks

Many investors see Ethereum’s transition from a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS) as a positive event that will happen this time, after several delays.

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However, Sotiriou warns that things might not go smoothly when the Beacon Chain merges with the Ethereum mainnet.

Some observers say an unforeseen delay, or other technical hurdle that messes up the transition, could still crop up and frustrate investors. Problems can also arise if many validators do not update their software in time and therefore are not prepared for the new chain, or if some APIs”breaking in ways many people can’t predict.”

Sotiriou summarizes the risks as follows:

The Merge is such a complex technical event, surrounding not just one big company, but a very decentralized network, so there are reasons why it might not run so smoothly..”