Cryptoverse: After Merge, ether heads for a $20 billion Shanghai splurge

Souvenir tokens representing the Bitcoin, Ethereum, Dogecoin and Ripple cryptocurrency networks dive into water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

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Sep 20 (Reuters) – Merger has come, seen and conquered. Not that you would guess from crypto prices.

The mega-upgrade to the Ethereum blockchain finally went live on September 15, moving it to a less energy-intensive “proof-of-stake” (PoS) system with barely a hiccup. Read more

Even though anticipation for the event saw Ether surge around 85% from its June slump, it has since fallen 19%, hit along with bitcoin and other risky assets by anxiety. investors in the face of inflation and central bank policy.

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Nonetheless, many market participants are optimistic about the long-term prospects of Ethereum and its native cryptocurrency.

“Previously, we spoke to sovereign wealth funds and central banks to help them build their digital asset allocations … but direct investments were rejected due to energy issues,” said Markus Thielen, chief investment officer at the manager. of IDEG Limited assets.

“With Ethereum moving to PoS, it clearly solves that last pillar of concern.”

Some crypto investors are now turning their attention to the next event that could shake prices up.

The next significant upgrade for Ethereum is “Shanghai”, expected by market participants in about six months, which aims to reduce its high transaction costs.

This would allow validators, who have deposited ether tokens on the blockchain in exchange for return, to withdraw their staked coins, hold them or resell them.

The stakes are high: more than $20 billion in ether deposits are currently locked up, according to data provider Glassnode.

The staked ether crypto coin – seen as a bet on the long-term success of Ethereum as it cannot be traded until Shanghai arrives – is trading at roughly parity with ether at 0.989 ether, according to data from CoinMarketCap, indicating confidence in future upgrades.

The coin had dropped as low as 0.92 in June.


Beyond Shanghai, a slew of other upgrades are planned for Ethereum, which co-founder Vitalik Buterin has dubbed “the surge,” “verge,” “purge,” and “splurge.”

The main focus of future upgrades will likely be the blockchain’s ability to process more transactions.

“Because the merger has been delayed for several years, investors, traders, and end users are very apprehensive about when Ethereum will scale significantly,” said Alex Thorn, Head of Research at Scale. from the company to the blockchain-focused bank Galaxy Digital.

Paul Brody, Global Blockchain Leader at EY, said, “The future of Ethereum must and will scale to hundreds of millions of transactions per day.”

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The primary goal of the merger was to reduce Ethereum’s power consumption as cryptocurrencies come under fire for their massive carbon footprint. Blockchain power consumption has been reduced by around 99.95%, the developers say, which could tempt powerful institutional investors once constrained by environmental, social and governance (ESG) concerns.

The merger and future upgrades are also hurting the investment appeal of so-called “Ethereum killer” blockchains like Solana and Polkadot, said Adam Struck, CEO of venture capital firm Struck Crypto.

However, institutional investors are yet to jump in as a daunting macro environment is cooling the waters of risk appetite.

In the longer term, however, the switch to PoS is expected to reduce the rate of issuance of ether tokens – potentially by as much as 90% – which should drive prices up.

Additionally, annual returns of 4.1% for staking ether tokens to validate transactions could prove tempting for investors.

However, while the proof-of-stake method enables these lucrative returns, many crypto purists point out that it takes Ethereum away from a purely decentralized model because larger validators could wield greater influence on the blockchain.

For now, however, the Ethereum world might be advised to take advantage of the Merge moment.

“There could be some volatility in the days ahead,” analysts at Kaiko Research said. “But for now, the community can take a well-deserved victory lap.”

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Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Assembly Pravin Char

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and non-partisanship by principles of trust.

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