- Marcus Sotiriou, GlobalBlock analyst, discusses the Ethereum merger and its potential benefits as well as the risks.
- According to him, DeFi’s yield factor and a 99.95% energy consumption reduction could allow it to flourish and attract investor interest.
- But it’s a ‘complex technical event’ that one.
Is the merger underrated? Marcus Sotiriou, crypto analyst, says it could be a key question for investors as crypto enters a pivotal week.
The countdown to Ethereum (ETH)’s most anticipated event – the Merge – is down to hours. And despite the price hovering below $1,750 after last week’s downside, optimism is still high that the major event will succeed.
Or will it…
Is it overrated or underpriced?
Before the momentum died out, we saw ETH prices rise in the days following the announcement of the merge date.
But price continues to struggle, currently around $1,730 since last week’s dip. Investors need to ask whether the ETH-ETH merger has been priced in or if there is an underestimation of its potential impact.
Let’s not forget about the merger.
The benefits
Sotiriou, analyst at digital asset broker GlobalBlock, says the merge is no doubt “the most impactful event that has happened in the crypto industry thus far.”
These changes have many advantages. ESG is great because it reduces network energy use by 99.95%. Basically, it helps remove one of the hurdles to increased institutional interest in ETH and the broader ecosystem – concerns over crypto mining and its energy consumption.
The analyst also sees a long-term implication around the 5% yield for ETH investment and its impact on the wider DeFi space. Not only will institutional investors benefit from knowing how to price in risk using the yield, but also retail DeFi.
“Institutional investors love cash flow,” he pointed out in the note, “so being able to receive a lucrative yield is another enticing benefit which could make ETH more investable for them.”
A ‘complex technical event’ – beneficial but with risks
Many investors see Ethereum’s transition from a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS) mechanism as a positive event bound to happen this time round after several delays.
Sotiriou warns, however, that things might not go as planned when the Beacon Chain merges to Ethereum mainnet.
Some analysts believe that investors could be frustrated by an unanticipated delay or other technical obstacle that causes the switch to become complicated. Issues could also arise if many validators fail to update their software in time and therefore be unprepared for the new chain, or if some APIs “break in ways which many people cannot predict.”
Sotiriou sums up these risks:
“The Merge is such a complex technical event, which is not surrounding just one big company, but a whole decentralised network, so there are reasons why it may not play out so smoothly.”
