Ethereum (ETH) conquers $1.7K ahead of the Merge – what to expect?

Key Takeaways:

  • ETH technicals look weak, albeit holding on to $1,700 support.
  • The price could rally ahead of the Merge.
  • Will Merge make ETH diflationary? Whales started accumulation regardless.
Ethereum (ETH) conquers $1.7K ahead of the Merge - what to expect?
image from medium.com

YEREVAN (CoinChapter.com) – Ethereum token Ether(ETH) recovered to $1,710 on Aug 25, after a choppy performance throughout the month. However, the long-awaited Merge could give the digital asset a bullish push toward the $2,000 barrier and beyond.

ETH technicals look weak

As of Thursday, the ETH/USD exchange rate stood above the 50-day exponential moving average (EMA-50; orange wave) but retested the EMA-20 as resistance (red wave). Additionally, the digital asset broke below a setup dubbed the ‘rising channel.’ The latter entails two parallel trendlines that enclose the price action while taking it higher.

Ethereum (ETH) daily price chart. Source: TradingView.com
Ethereum (ETH) daily price chart. Source: TradingView.com

The rising channel does not forecast a bias once the token leaves the formation. However, the declining trading volumes indicate an insufficient bullish incentive to continue the rally.

Meanwhile, as the Merge edges closer, experts believe it will boost the Ethereum ecosystem and, by extension, the token price.

Ethereum Merge is around the corner.

As CoinChapter reported earlier, the Merge refers to the “merging” of the Ethereum Mainnet with the Beacon Chain, scheduled for Sep 10-20. The latter is a consensus layer that has been running in parallel since December 2020. Ahead of the Merge, the Mainnet facilitates the DeFi transactions and runs on Proof-of-work consensus.

The latest Ethereum blog post on Aug 24 asserted that the Merge would be different from previous network upgrades in two ways. First, node operators need to update both their consensus layer (CL) and execution layer (EL) clients in tandem, as opposed to updating one of the two.

Second, the upgrade activates in two phases: the first, named Bellatrix, at an epoch height on the Beacon Chain, and the second, named Paris, upon hitting a Total Difficulty value on the execution layer.

clarified the blockchain.

After the Merge, Ethereum will fully transition to proof-of-stake, the current consensus on Beacon Chain. Moreover, the blockchain hiked up the rewards for ‘bug bounties’ to $1 million ahead of the upgrade.

Until now, the so-called bug-bounty program was offering payments of up to $250,000 and a place on its leaderboard to hackers who uncovered critical errors. The increase was announced in the same blog post on Wednesday.

Also read: ETH/BTC: Ethereum Holds Key Support Vs Bitcoin, Can It Rally Again?

Green and deflationary ETH

Apart from sustainability and dramatic energy usage reduction, the Merge will make the ETH token deflationary, explains Erik Lowe at Panthera Capital.

The issuance of new ETH is about 14,600 ETH/day, which is the aggregate of 13,000 ETH from mining rewards on Mainnet and 1,600 ETH from staking rewards on the Beacon Chain.  After “The Merge,” there will be no PoW and thus no mining rewards, leaving just 1,600 ETH/day in staking rewards.

asserted Lowe.

Thus, after the Merge, Ethereum’s issuance rate of 1,600 ETH/day in staking rewards minus the fees burned nets out to zero. Additionally, once validators’ penalties and lost ETH tokens are subtracted, Ethereum issuance would become net negative. 

In the context of today’s inflationary environment, Ethereum’s shift towards a potentially deflationary asset is an exciting prospect.

further asserted the expert.

Ethereum whales apparently agree as the number of addresses holding over 100ETH grew to a 16-month high.

Ethereum whales
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Ethereum, Ethereum (ETH) conquers $1.7K ahead of the Merge – what to expect?

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