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DON’T Buy Ethereum before the Merge


The hype for the Merge of Ethereum has been going on since 2019. Not only is the Ethereum community looking forward to Ethereum 2.0, but also the entire crypto market as this marks a new milestone in blockchain tech. The month if the merge is here, but crypto prices are very low and still crashing. Is it a good idea to buy Ethereum before the merge? Not really. In this article, we’ll go over what the merge means for Ethereum and why it might be risky to buy ETH.

What is Ethereum (ETH)?

Ethereum is a decentralized blockchain platform that creates a peer-to-peer network for safely executing and validating smart contract application code. Participants can do business with one another using smart contracts without the need for a reliable central authority. Participants have complete ownership and visibility over transaction data since transaction records are immutable, verifiable, and securely disseminated across the network. Ethereum accounts that users have created both send and receive transactions. As a cost of executing transactions on the network, a sender must sign transactions and use Ether, Ethereum’s native coin.

ethereum eth

Why is Ethereum Good?

Ethereum provides the basis for decentralized applications or dApps. These decentralized applications offer the advantages of the blockchain in different areas in the digital space. The basis for this are intelligent contracts, the smart contracts that use the Ethereum blockchain.

The best-known group of decentralized applications is probably DeFi. These are decentralized financial services that have grown in popularity in recent years. Furthermore, Ethereum is the basis of most non-fungible tokens (NFTs). NFTs are unique digital objects that cannot be duplicated and therefore can become extremely valuable.

Ethereum Roadmap – Where are we Today?

Ethereum has been working since July 30, 2015. However, not everyone knows that we are still in the very first stages of development. Here are the important milestones which the founder Vitalik mentioned during one of his recent talks:

  1. The Merge (we are here): This phase represents the switch of the consensus mechanism from Proof-of-Work to Proof-of-Stake
  2. The Surge: In this step, Vitalik talks about the further development and increase in scaling, L2s and sharding which all result in lower fees.
  3. The Verge: This step might sound a bit technical, but fear not! Basically, Vitalik spoke about the Verkle Tree, which is a process that encodes the blockchain. This results in faster and more secure data transmission on the blockchain, and quicker verification & movement of data from one computer node to another.
  4. The Purge: With all previous additions to the blockchain done, now comes enhancing the “craft”. This step consists of the different EIPs such as EIP1444, removing unnecessary data, and clearing logs that might cause congestion in the system.
  5. The Splurge: This final step consists of all the “cool stuff” that Ethereum is able to do, such as adding verifiable delay functions (VDFs) for extra security, and blocks finalizing immediately for extra speed.

Why it is a GOOD IDEA to Buy Ethereum before the Merge?

In theory, Ethereum 2.0 should’ve affected ETH prices positively. In fact, this upgrade will affect Ethereum’s sustainable growth in the long term. This is because Ethereum’s chainis currently slower and can’t scale properly without any help from L2 solutions. The upgrade will lead to an increase in the number of people who use ETH over its competitors.

Additionally, because the new POS system rewards institutions more than the POW system does, the upgrade will result in an increase in institutional investing. This will result in a more favorable price movement for ETH. Also, the update will bolster Ethereum’s position as the largest platform for smart contracts. This is due to the fact that this update will fix many of ETH’s present problems, including the high GWEI costs and drawbacks of the antiquated POW mechanism.

Despite all those positive affirmations, we currently see the crypto market crashing yet again. ETH is back to $1,500 while Bitcoin breached 20K and reached a current price of around $18,800.

ETH/USD 1-week chart showing the downtrend of ETH
Fig.1 ETH/USD 1-week chart showing the downtrend of ETH – GoCharting

Why is it BAD to Buy Ethereum before the Merge?

Ethereum’s upgrade is definitely a good thing for ETH and the crypto community. However, the current market dynamics are not in place for a good entry. In fact, many fundamentals came into play and caused severe crashes in crypto prices, including ETH.

The macroeconomic variables do not appear bright right now. These are the external economic variables that have an impact on bitcoin purchases as well as regular purchases. It appears that interest rates will continue to rise beginning in September and potentially continuing through December or beyond. The cost of borrowing and the motivation to save is determined by interest rates. An increase in interest means that institutions will mostly have to pay higher rates for loans. Sell the news, buy the hype. Whenever a significant update is planned, cryptocurrencies typically see upward price movement up until launch, followed by a sudden decline. The Cardano Goguen update, which had a severe crash after it was deployed, is a prime illustration of this.

Total crypto market cap in USD
Fig.2 Total crypto market cap in USD – coinmarketcap

Additionally, the initial release of ETH 2.0 on September 6th won’t include all of the 2.0 features. With the first update, ETH will have completed around 55% of its work. The modification to POS will mostly take effect on September 6. However, toward the end of 2023, sharding will be included.

Conclusion

ETH 2.0 is a fantastic upgrade that will provide Ethereum with many much-needed enhancements and ensure its place as the largest smart contract platform. However, given the state of the market right now, buying isn’t the best course of action. After the update, we might be able to buy ETH over a period of 6 to 12 months as part of a dollar-cost-averaging plan. Long-term, this upgrade will guarantee that ETH experiences a sharp price increase to perhaps new all-time highs in the 2024 Bull Run, which is projected to occur as a result of the subsequent halving of Bitcoin.


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