The Merge

The Ethereum network’s Merge is almost upon us. After many years of hard work by the Ethereum community, Ethereum will be transitioning from proof of work to proof of stake consensus, reducing its power consumption by an estimated ~99.95% in the process.

TLDR;

Post merge, network power consumption goes down by ~99.95% and you can get a risk-free yield of 4-5%
Ethereum’s ecosystem is likely already more valuable than Eth’s market cap
Most of the significant Web3 innovations happened first on Ethereum
It has a functioning governance model

5 Reasons why Ethereum may finally flip bitcoin

The significance of this change is being widely followed by the broader cryptocurrency markets, so much so that a key source of research among the crypto finance community is the monthly Ethereum All Core Devs calls where decisions are made by key members of the Ethereum community on future changes to the protocol.

The Merge is being coordinated by various teams on these calls. It’s incredible that the activities being coordinated here are being syndicated as crypto market intelligence by financial research departments. It just goes to show how far the widespread adoption of cryptocurrencies has come during the past few years.

At the time of writing, the Merge is slated for mid-September. Crypto markets have already been pricing this in due to the significant price appreciation Ethereum has seen during the past month which is up roughly 60% versus bitcoin’s 15% gain.

Increasing Market Capitalisation

This increase in capitalisation also means that Ether is gradually eroding bitcoin’s market capitalisation, with bitcoin’s just shy of $450bn versus Ethereum’s $200bn (next in line is Binance Smart Chain with $50bn). It is feasible that in the months following the Ethereum Merge, we could see Ethereum’s market capitalisation eclipse or flip bitcoin’s. The flippening as it is known in the Ethereum community has been speculated on for some time, but I genuinely believe that the Merge could be the catalyst for this event to finally happen.

ESG Criticisms

During the most recent crypto bull market, we saw a significant number of institutions embracing cryptocurrencies and starting to hold them on their balance sheets. The investments were typically dominated by bitcoin and Ether. However, against a background of ever-increasing scrutiny of corporate ESG activities, the environmental impact of these cryptocurrency networks is something that does not sit well with many investors.

When the Ethereum Merge takes place, all of a sudden, these institutional investors will have an out. By holding Ether, these ESG criticisms go away, and this is something that will be incredibly attractive to them and their shareholders. Hence I believe there will be significant outflows from bitcoin into Ether.

There are many other cryptocurrencies that already use proof of stake consensus, however, due to the fact that Bitcoin and Ethereum make up almost 60% of the cryptocurrency market capitalisation, more risk-averse institutional investors are unlikely to hold significant positions in some of the alternatives.

Risk-Free Yield

The huge reduction in power consumption isn’t the only benefit of the Merge. Another factor that will be incredibly valuable to all holders of Ethereum is the yield that becomes available. All holders of the Ether cryptocurrency will be able to obtain a risk-free yield in the 4-5% range which again will be very attractive to investors.

This yield will be considered risk-free due to the fact that it is baked into Ethereum natively, regardless of whether holders store their Ethereum in cold wallets, hot wallets or on exchanges. They will easily be able to stake their Ether for this yield. Contrasting this to bitcoin which offers no yield opportunities, many holders of bitcoin are likely to question why they are holding an asset when there’s an alternative with a not vastly…