Ethereum will complete a technological change that should affect the price of cryptocurrencies
In 2022, the price behavior of cryptocurrencies, especially Ethereum, can be divided into two phases. From the beginning of the year to the end of the first semester, quotations collapsed due to the confirmation of specialists’ expectations. Market experts expected rising interest rates in the United States and Europe to curb inflation. And in more restrictive monetary policy environments, crypto asset prices plummet.
However, since July, that has started to change, and quickly. Within two months, prices almost doubled. From July 12 to August 13, property prices rose 91%. And the justification is a long-awaited event, postponed countless times and finally confirmed: a technological update, called The Merge, that is, The Fusion, which will make cryptocurrency mining faster, cheaper and more sustainable.
“The price of electricity for ethereum 2.0 mining will be 99% less than what is used today,” said João Marco Braga da Cunha, portfolio manager at cryptocurrency exchange Hashdex. Energy consumption will be lower due to technological changes. Instead of mining (or producing) Ethereum through proof-of-work (PoW), the new method will have proof-of-stake (PoS).
Complicated? Don’t let these names scare you. Currently, the mining of major cryptocurrencies depends on computers performing complex calculations – whose sole purpose is to mine the coins. It is work on a computer, so proof of work, which consumes huge amounts of energy.
In proof of participation, which will be implemented on ethereum, the production of new coins will depend on the proof that the producer has the values to be converted. For example, fixed dollars, euros and virtual central bank currencies. Just prove that the amount (or stake) exists. “In addition to lower energy consumption, the network will become faster and more efficient. With this greater agility and security, cryptocurrency is one step ahead of the competition,” said Valor Investimentos crypto expert Virgílio Lage.
The transition process is already underway. The first phase, known as Bellatrix, was completed last Tuesday (6). The full changeover is expected to end between Tuesday (13) and Thursday (15). However, according to experts, this change will not only be positive for ethereum. According to Raquel Vieira, a cryptocurrency expert at analyst firm Top Gain, other cryptocurrencies tend to increase in value in the short term. “Miners should opt for other cryptocurrencies, which could cause their price to skyrocket.”
SCRATCHES However, experts warn that this change carries certain risks, especially cryptocurrency inflation. Lage, of Valor, says that creation will be much easier than through mining, production can be unlimited, which will devalue currencies. “It would be like the government issuing money without control.” Therefore, experts do not deny the possibility of a drop in ethereum prices after the end of the transition. Raquel Vieira, of Top Gain, states that “the currency will continue to rise until the end of the transition, but may suffer a strong correction as the process ends.”
Another thing that may not please the market is the continuation of monetary tightening. According to Acqua Vero Investimentos crypto expert Guilherme Bento, the cycle of high interest rates will continue, making the scenario unfavorable for cryptocurrencies, regardless of the method used to produce them. “This could be a major factor in harming the crypto world, and ethereum is within that range,” Bento said. Experts say the merger is unlikely to allow ethereum to replace bitcoin’s lead. The oldest cryptocurrency has an issuance limit in its source code, and that’s 21 million cryptocurrencies.Valor Investimentos’ Lage says that “this makes it more secure and can be considered a store of value.”