How the second largest cryptocurrency by capitalization will behave when switching to a new protocol, and what will happen to its price in the coming months
On August 29, the Ethereum rate updated the minimum since July 27 at $1.43 thousand. .7%, according to Coingecko.
Already next week, with the Bellatrix update , an important event in the history of the second largest cryptocurrency by capitalization will begin – the transition to the Proof-of-Stake protocol, the so-called “Merger”. Experts told how the update will affect the rate of the leading altcoin and gave forecasts for the value of the asset for the coming months.
Waiting for the Merge
Until the expected September 15-16 “Merge” (The Merge), the price of Ethereum is highly likely to remain above $ 1.5-1.6 thousand – such a scenario is based on the situation in the options market, says CFO and head of trading operations at ICB Fund Chen Limin.
According to the expert, in the next two weeks, the blockchain update of the second largest cryptocurrency by capitalization will support its quotes. However, a return in this period of time to the rate of $2,000 reached in mid-August is unlikely due to the low risk appetite of investors in world markets, the specialist believes.
Likely fork
The price of the ETHPoW version of the token in the event of a fork after the “Merger” in the first hours will experience serious selling pressure from those market participants who want to monetize this “gift” (the token will be credited to Ethereum owners for free if it appears), Limin suggested. In his opinion, in the future, the price of this version of the cryptocurrency may not recover to its original levels, since its future seems vague.
Stablecoin issuers, DeFi platforms and NFT marketplaces recognize only PoS tokens, while the “revolutionary miners” will not have enough resources to fully compete, the expert believes. He drew attention to the fact that ETHPoW is currently trading at a price slightly above $50, which is only 3.2% of the value of ETH, which will soon switch to Proof-of-Stake. Many who sell ETHPoW in this hypothetical situation convert funds to ETHPoS, supporting the latter’s rate, the specialist noted.
Fed policy
After mid-September, Ethereum may face the implementation of the second phase of the classic “buy the rumor, sell the fact” rule, says ICB Fund CFO. According to him, the depth of the fall will be determined by the current situation at that time: investors will already get an idea about the state of the US labor market (data should be published on September 3) and the dynamics of consumer prices in the US (September 11), and they will finally determine their expectations regarding the Fed meeting (September 21).
If there are grounds to count on the scenario of raising the rate by 50 bp. etc., then the wave of profit taking on long Ethereum positions after a successful Merger will not continue seriously, the expert explained. He added that the Fed meeting itself and the reluctance of the monetary authorities to ease policy in 2023 could potentially support bearish sentiment. By the end of September, Ethereum may go to new lows, admitted Limin
The same opinion is shared by the head of the analytical department of AMarkets Artem Deev. He indicated that the tightening of the Fed’s monetary policy will continue, as Jerome Powell said last week, which immediately led to a fall in indices and cryptocurrencies (Ethereum traded at about $1.5 thousand).
The fight against inflation will require further tough rate hikes, even despite the possibility of a recession in the economy, the expert said. He explained that this will definitely lead to a reduction in the yield of all risky instruments, and the exchange rates will also fall.
“It is quite possible that Ethereum will reach $1,000 by the end of the year, even if there is some positive news. But growth on such factors will be short-lived — fundamentally for ETH and other coins, the downward trend will continue,” the analyst believes.
slow recovery
For Ethereum, as well as for the entire cryptocurrency market, the dynamics of the stock markets are now the determining factor in the direction, Deev believes. He explained that cryptocurrencies have long been repeating the movements of classical markets – token prices decline during the fall of American and world indices, and also grow after them.
Therefore, it is worth relying on the expectations associated with traditional exchanges, and they are not positive, the analyst admitted. According to Deev, a return to the highs could take at least three years, which is the period of recovery now predicted for the stock markets.
