The Ethereum Merge Is Coming – Bullish or Bearish?

Introduction

Yes, it’s finally happening: Despite years of delays and memes like the one below becoming routine, Ethereum is approaching a critical milestone: The Merge! In this article, we’ll shed light on this crucial event and what Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) means for ETH and the broader crypto space.

Only a Few Weeks Until the Merge?

• Yes, we have been talking about the Merge for quite a while on this channel – but expectations of an imminent launch have been pushed out time after time again. Is this time different? It certainly seems so since tomorrow the last testnet Merge is scheduled to occur before the real Merge comes next.

parithosh | 🐼👉👈🐼 @parithosh_j

The Goerli testnet will merge in the next ~2 days, this will be the last testnet to merge before mainnet. If you are running a Goerli node, please update and follow the numerous guides to ensure we can have a smooth merge. More information here: notes.ethereum.org/@launchpad/nod…

NRD @NorthRockLP

IMO the appropriate over under for Merge date is Sep 17th, with equal odds it occurs before vs after that date.

Evan Van Ness 🦇🔊 @evan_van_ness

Do people realize that next week Ethereum is going to set the schedule for the Merge? https://t.co/UR5xyR7F5E

• If you need a reminder of what the Merge is, check out this great summary by Bankless. 

The Bull Case

• If you checked Crypto Twitter recently, you probably didn’t miss the bullish hopium spread by ETH supporters on a daily basis. In short, this meme does a good job summarizing the current sentiment:

theweeknd.eth @LilMoonLambo

THE ETHEREUM MERGE THIS YEAR COULD VERY WELL BE THE MOST BULLISH EVENT IN OUR LIFETIME AS ETH WILL MOVE TO PROOF OF STAKE, REDUCE ISSUANCE BY 90% AND REDUCE ENERGY CONSUMPTION BY 99.5% WHICH COULD START THE BTC FLIPPENING AND THIS IS HAPPENING NEXT MONTH

• To further promote the bull case for ETH, let’s give the word to a few of Ethereum’s biggest advocates (or “ETH maxis” in other words 😉):

sassal.eth 🦇🔊🐼 @sassal0x

The Merge, summarized: - The Ethereum network will be full Proof of Stake - 99.98% energy use reduction - 80-90% ETH issuance reduction - Staked ETH APY increases - ETH becomes net deflationary - No new ETH enters circulation until at least 6mo's after You don't own enough ETH.

eric.eth @econoar

The merge will be a huge success. Layer 2 will scale Ethereum. The masses will realize ETHs monetary policy is best in class. ETH will flip BTC. It’s all inevitable but do you have the patience to wait and the conviction to withstand the FUD along the way?

Swagtimus.eth🦇🔊L2'22 @Swagtimus

Goldman Sachs are telling their customers about the Merge, Surge, Verge, Splurge, Purge What a time to be alive

NRD @NorthRockLP

Goldman out with a Merge note today. Normies and institutions will soon come for our Merge assets. Beware and enjoy. https://t.co/CI2EXPIrD3

• Jokes aside, it’s undoubtedly true that many people still have no idea what the Merge is and what a dramatic impact it will likely have on ETH as an asset.

odin-free.eth ✨🐺 @odin_free

99.999% of the world doesn't know about the Merge and what it'll do to Ethereum. Every year, $eth sell pressure drops by $8bn eth issued per year today: ~4’500’000 eth issued per year after Merge: ~600’000 Post-merge, we'll have ~negative issuance due to EIP-1559 burn rate.

• While not anyone in the crypto community might agree, the fact that Ethereum will transition to a much more energy-efficient consensus mechanism will significantly impact Ethereum’s public perception as an “ESG-compliant” asset – which could prove to be an advantage over BTC when it comes to regulation and institutional investing.

Crypto-Gucci.eth ᵍᵐ🦇🔊 @CryptoGucci

The Proof of Stake narrative for Ethereum keeps getting stronger and stronger

BreakingCrypto @BreakingCrypto0

CFTC CHAIR: BITCOIN MINING HAS TO EVOLVE AND RECOGNISE THAT ITS ENERGY USE IS TOO HIGH. $BTC

• Besides the energy efficiency narrative, Ethereum believers often connect the Merge with a concept called the “Triple Halvening.” Sounds bullish, right? Read the thread below to get an in-depth explanation of what the “Triple Halvening” is and how it might affect the ETH price after the Merge.

Montana Wong @Montana_Wong

Ethereum is about to experience a once-in-a-lifetime phenomena called the "Triple Halvening" after the upcoming Merge. What this is, and how this will drastically affect every ETH holder 👇

dataalways.eth @Data_Always

Why I'm bullish on The Merge.

The Bear Case

• While the Merge is a critical milestone for Ethereum and the broader crypto space, it will NOT offer a solution to all of Ethereum’s problems – notably the scaling issues plaguing the L1 blockchain. The Merge “only” marks the transition of Ethereum’s consensus mechanism from PoW to PoS.

vitalik.eth @VitalikButerin

@barnabemonnot There have been so many "the merge will fix scaling" takes that I think we're not far away from EIP-1559 being dethroned from that status.

NRD @NorthRockLP

In many ways the Merge will be an important step towards realizing ETH's full potential, all of which will be required for it to fill this role. However, the journey does not end the day we Merge. This is just one chapter in a story with many unwritten chapters.

• Besides the fact that the Merge could go wrong (compare it to a space shuttle having its engines replaced mid-air), there are other significant risk factors – mostly of economic and systemic nature. Bankless does a great job summarizing these risks, and the potential chaos around the ETH Merge in their latest newsletter. The tldr is:

  • During the Merge, the Ethereum blockchain will be “hard forked” into two chains: the PoW and the PoS chain. Initially, this can potentially lead to quite a bit of chaos in DeFi land since stablecoins and liquid staking tokens (stETH, rETH, etc.) will fall to 0 on the PoW chain (they can’t be redeemed anymore). This will lead to a potentially considerable amount of volatility, liquidity movement, and MEV (Minter Extractable Value). Read more in this article to find out more about the potential chaos surrounding the Merge.

bankless.eth @BanklessHQ

The Merge is coming™️ What's the biggest threat? It's not technical. It's economic. @0x_Lucas explains:

newsletter.banklesshq.comThe Biggest Threat to the Merge [LITE]The Ethereum Merge is coming and it could bring economic chaos

• It’s important to remember that the Merge has a drastic impact on a key player in the Ethereum ecosystem: miners. Overnight their business model will drastically change…

Argent @argentHQ

The Merge is happening. And it’s one of Ethereum’s most significant upgrades But many miners are unhappy about it This has led to the possibility of a Proof of Work chain on Ethereum after the Merge

egk10.eth 🦇🔊🐼💚🔴 @EliekfouriE

Congratulations @laurashin for bringing to discussion one of the most important event that Ethereum Merge to PoS is. Hope you continue post more interviews about it with others points for view. https://t.co/7R1OIRorvK

kain.eth (✨🔴_🔴✨) @kaiynne

Ok let’s say miners fork to a PoW chain. We then get two versions of everything, but a lot of DeFi on this chain will be in a weird limbo state. It will keep working in theory. But you will have like powDAI backed by powETH. Assuming liquidation bots operate that’s gonna be wild.

How to Position Around the Merge

• Has the Merge been priced in by the recent pump, or is there more juice in the tank? Clearly, ETH has outperformed BTC in recent weeks…

Route 2 FI @Route2FI

Both $BTC and $ETH are now 65% down from ATH. But more interesting: - $ETH is up 85% from the bottom - $BTC is "only" up 32% from the bottom The merge narrative running strong?

• Who knows what the short term will bring, but what is clear is that traders are making big bets right now. If you want to gamble on a short-term pump (or dump after the Merge), be careful not to burn your hands… Avoid leverage and for a more hands-off approach, accumulate ETH during dips and hold it for the long term. If the Merge goes as planned, it should certainly have a BIG impact on Ethereum’s tokenomics and positively influence the ETH price in the long run.

glassnode @glassnode

For the first time in history, $ETH Options Open Interest at $6.6B has surpassed $BTC Open Interest at $4.8B. This appears to be a result of traders betting big with call options the Merge scheduled for mid-September. Read more in our latest analysis👇 glassno.de/3BNVq1d

Laevitas @laevitas1

👀ETH ATM vol term structure clearly pricing in some big moves for September coinciding with the merge.

• A possible short-term scenario could be: Run up until a few days/weeks before the Merge, then profit taking and derisking. If the Merge goes through smoothly, there could be more bullish price action (similar to BTC’s halvings which mostly show their bullish tokenomics effect after the fact).

slurp 〽️ @slurpxbt

so been thinking about this imo more and more people will realize merge is relativelly risky event and will decide to not hold eth into it does the eth money flow to btc 🤔

• Many traders fear the Merge as a “sell the news” event. While this might certainly hold true, the FUD that ETH stakers will dump all their ETH right after the Merge is undoubtedly not factual. In fact, staked ETH will not be unlocked until at least 6-12 months after the Merge – and even then, a sudden drop is unlikely due to an unstaking queue.

korpi @korpi87

"ETH will dump hard when >12M staked ETH get unlocked after the Merge." I've noticed some people consider the Merge as a negative price catalyst due to a supposed huge ETH unlock. This is wrong. Here is what they miss about the $ETH unlock. 🧵👇

• Have been and will there be other ways to “play the Merge” besides holding ETH? Indeed – in recent weeks, tokens related to the Ethereum ecosystem benefitted from the broader market bounce remarkably.

The Defiant @DefiantNews

Ethereum Classic finds new life as the Merge fast approaches 🚀 $ETC has rocketed 174% since July 13, as investors and traders speculate that the Merge will redirect a significant portion of hashing power to the PoW chain. 🔗: @samuel_haig thedefiant.io/ethereum-class…

thedefiant.ioEthereum Classic Shakes Off the Dust and Rockets 174% - The DefiantVestige of Old Ethereum Finds New Life as The Merge Approaches

Sisyphus @0xSisyphus

The best narrative for merge season was/is liquid staking The second best narrative has been the layer 2's, but it may just be a timing thing around Optimism incentives and Arbitrum Odyssey coming back

Sisyphus @0xSisyphus

Ask yourself what goes up more than ETH if ETH goes up bigly into merge Long that

Emily👁️(CFA,CAIA)Chartered Chain Checker @AutomataEmily

ETH Merge plan -Hold ETH in wallet for airdrops -Open account with exchange likely to list the airdrop...which ones though?

• However, if you want to trade altcoins right now, be aware that this small wave of bullishness could end as quickly as it began as we find ourselves in the possible later innings of a macro bear market rally. And no, the Merge will not be enough of a bullish catalyst to withstand a potentially broader market crash…

Wifey @WifeyAlpha

You are seeing people starting to get emotional over the (small) possibility they could recover all losses from the bear market. The reason the market bids in bear market rally is due to 5/6

Wifey @WifeyAlpha

the market temporarily ending a “fundamental sell off” as technicals have become so stretched that they have taken over thus creating a technical rally. This is not a fundamental bid and thus needs to be acknowledged. The permabulls will try to convince you otherwise. 6/6