The Ethereum merger is one of the most significant events since the emergence of blockchain and the industry. The event will shift the blockchain from Proof-of-Work (POW) to Proof-of-Stake (POS). While everyone awaits the positive effects of Merge.
The effects of the transition are already echoing in the crypto market. The market saw a sharp drop in Ethereum prices over the past 48 hours. In addition, Crypto market analysis experts fear that there could be another drop in Ethereum price after the merger.
While everyone expects good results, there is still a chance that a hard fork will occur. When this happens, it negatively impacts crypto prices.
Merge hype could be a buy rumor, a news sell scenario
Ether has already performed better than BTC in recent weeks thanks to the merger hype. But some pundits fear the merge hype could lead to a “buy the rumor, sell the news.”
The buy-the-rumor-sell-the-news event takes place in the capital markets. This is when high expectations of merge events or economic reports cause asset prices to rise. The increased prices fall again after the end of the event.
Popular cryptocurrency trader and influencer Lark Davis offered his thoughts on the hype. In his tweet, he said the merger was a fundamentally bullish event. Davis outlined the expected features of the upcoming Ethereum POS. However, he also stated that they would not have a significant impact immediately.
According to Davis’ analysis, the effects of increasing energy efficiency, emissions and all functions will only be reflected in the long term. Hence, he believes the Ethereum merger has the “sell the news” effect.
Another major crypto influencer, Quinten Francios, commented on the merge hype. According to Francios, Ethereum’s post-merge price will fall in contrast to Bitcoin’s price.
Therefore, this implies that Bitcoin price will increase while Ethereum price will decrease after the merger. He added that Ethereum price will recover strongly after some time.
Ethereum price crashes amid merger l Source: ETHUSDT on Tradingview.com
The Ethereum merger will not solve other fundamental problems
Experts have explained why Ethereum merger results are not taking effect quickly. The transition will change the blockchain’s consensus mechanism on POS, but will not solve some other fundamental problems. For example, it won’t address the problem of low gas tariffs or expand the network’s capacity.
It will also not improve transaction speed. A smooth upgrade does not solve the problem of high transaction fees.
Aloe CEO Haward Wu expressed concern on LinkedIn about high gas fees in Layer-2s. He said they would only scale if enabled by Ethereum throughput.
But Buterin’s four-phase theory may address these issues. Its data sharding, execution and scaling solutions solve all problems.
Featured image by Pexels, chart by TradingView.com
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