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Coinhead
To get some local-expert views on Ethereum’s monumental Merge upgrade, we spoke to BTC Markets’ Caroline Bowler and grabbed a few thoughts from Kraken’s Jonathon Miller, CoinSpot’s Ray Brown and Binance Australia’s Leigh Travers, too.
We’re aware we can barely leave this topic alone at the moment. But it is “Merge Day” after all. And, as Ethereum co-founder Joe Lubin intimated to Bloomberg yesterday, in terms of historical crypto events, The Merge could well be in the top three.
To understand it a bit more, Luke Ryan from CoinJar (another top Aussie crypto exchange) has been providing us with his regular, brilliantly articulated takes.
Plus, we recently spoke with Collective Shift’s Matt Willemsen, who gave a great overview of its potential benefits to the widely used Ethereum network.
We’ve also chatted with Apollo Capital’s expert analyst David Angliss on a few occasions about The Merge and new, Ethereum-based “DeFi 2.0” staking protocols set to benefit from it.
But now, let’s hear from some other Aussie crypto-industry notables on the matter. We’re tempted to merge their thoughts into one big soupy mash of expert opinion, but for clarity’s sake, let’s go one by one.
Stockhead spoke on the phone with the CEO of Melbourne-headquartered BTC Markets this afternoon, and, while she doesn’t expect any particular hype-based price surging immediately off the back of The Merge, Bowler still sees the event as an ultimate net positive for the crypto industry.
“I think the excitement around The Merge is justified – the sheer technical feat that they’re looking to achieve with this is quite phenomenal,” said Bowler.
“It’s like trying to change an airliner’s engine midflight. That’s effectively what they’re doing and achieving. It’s a very audacious undertaking but I’m very confident in its success at this stage – it’s been years in the making.”
And what about its effect for the investor community?
“Yes, it’s definitely an exciting event for investors. We’ve been seeing increasing volumes in trading on Ethereum – not comparable to the last bull market, of course but an uptick nevertheless.
“But I really think that what The Merge is going to do is help establish over time the value that is to be found in the blockchain economy. It’s something that I think will probably have greater long-term significance.”
Any hope for a crypto revival (let’s not call it a bull run) on the back of The Merge? If not short term, perhaps looking further ahead?
“Oh, absolutely. It’s not even a question in my mind. I think it’s a guarantee we’ll see a crypto resurgence again, but I would say that, running a crypto exchange! But this, and events like the halving… there’s always a flurry of trading activity in the build-up. I would expect a degree of ‘buy the gossip, sell the news’ with this.
“But do I think it’ll be a sell-off? No I don’t think it will be based on this. We’ve seen wilder price swings related to the inflation figures from the US, and it’s that sort of thing that’s continuing to have a greater impact on markets. There still clearly needs to be a lot of macroeconomic factors that need to play out.
“That’s to be expected and you can see that as a good thing in a way. It means crypto is of a size where it’s in the global conversation, and quite rightly taking that position.
“What I do think will be interesting is how some of the ERC-20 tokens built around Ethereum will develop off this, as I expect there could be a lot of growth.
“It also throws the gauntlet down to the so-called Ethereum killers like Solana and Polkadot – other Proof-of-Stake networks. Layer 1 price movements will be really interesting to watch.
“I think The Merge is exposing more people to the Proof-of-Stake term and what it, and staking, means. I think staking and its yield benefits will become the way in to crypto for a lot of people.”
Meanwhile, over at the Kraken exchange (Australian edition) its managing director Jonathon Miller also had a ton of interesting thoughts to share with us…
“The Merge is an important milestone for the future of crypto and one that other networks will be watching closely as an example,” said Miller, who spoke to its many perceived benefits, including 99%+ energy-consumption reduction.
“However, it won’t be a magic bullet for scaling issues on Ethereum,” he noted, adding:
“Australian blockchain businesses will still have to rely on layer 2 solutions to grow. In saying that, the Merge will allow the mechanisms to be in place for the network’s scalability improvements to be built.
“Ethereum provides critical infrastructure for blockchain developers to build and deploy their own decentralised applications and crypto assets. The Merge, being potentially one of many changes to the network, will unlock a whole new level of potential for the deployment of these innovations.”
“As the second-largest cryptocurrency project by market cap, investor interest in Ethereum has remained resilient leading up to the Merge,” explained Miller.
“Following The Merge, there is potential for the market cap to grow further as the network’s scalability improvements are built. Some have even suggested The Merge could be the catalyst for ETH to overtake BTC as the world’s largest coin by market capitalisation.”
Stockhead also grabbed a good deal of insight on the Ethereum event from another major local crypto identity – Binance Australia’s Leigh Travers.
Hi, Leigh. Is this whole Merge hoo-ha justified?
“Yes, The Merge attention and hype is absolutely warranted. It’s the evolution of Ethereum to a faster and more sustainable global transaction network. Fundamentally the proposition and case for the Merge are very sound and based on years of development and research.
“Increasing the security of ETH, setting the roadmap for greater scalability and increasing carbon efficiency are key reasons why millions are watching this event.”
“This has been called the Y2K moment for crypto. Ethereum has the second largest market cap and has been the foundation for so many projects, companies and innovations, so we’re all anticipating what will be next.”
When it comes to staking ETH… should investor expectations be tempered for the moment? Is it a case of playing the long game there?
“From an investment perspective, looking at the capital flows – we’re going to see the issuance rate or the inflation rate drop substantially as well as enable holders and stakers the ability to generate a return, in ETH – which is a massive development.
“Nansen, a blockchain analytics platform, recently reported just over 11% of the total circulating ETH is staked, with 65% liquid and 35% illiquid. Binance was listed as one of the top 5 entities holding 64% of all the staked ETH.”
“But it’s important to note that returns from staking are in ETH, not fiat. Glassnode’s reports have shown the majority of ETH [tokens] staked in the US are between 2500 to 3500, meaning 60% to 70% of all ETH staked are underwater in cash terms.”
What post-Merge predictions might you have regarding its affect on the crypto market?
“Post Merge, ETH becomes a more attractive, more carbon-efficient investment with a reduced technology risk profile appealing to those who believe the future of transactions are internet native.
“I expect to see more opportunities for projects at the application layer that have demanded a more scalable Ethereum blockchain.”
Do you think PoS and its energy-friendly narrative will be something that increases off the back of The Merge… and how do you think that might affect the perception of Bitcoin?
“Reducing the environmental impact or reducing the energy intensity of the Ethereum blockchain by 99% is massive. As the world’s first ESG reporting digital asset exchange, Binance Australia welcomes the movement towards more progressive frameworks and initiatives to empower, educate and foster positive impact globally.
“Recently, we have seen an increase in the Ethereum price not just in the price of Ethereum but in the ETH to BTC ratio – so Ethereum has been outperforming on the short and medium horizons over Bitcoin.
“Traders have been looking at the Ethereum Merge as a good buying opportunity and it’s being referred to as a ‘triple halving’ – a narrative designed to influence the traders who historically had a long bias into Bitcoin’s supply halvings. Narratives move crypto markets but as the market matures, so do fundamentals.
“In the short term, investing is a voting game (supply and demand) in the long term it is a weighing (fundamentals). With holders of ETH able to generate above reserve rate (in ETH) returns from staking, ETH will be attractive to hold versus Bitcoin in regards to the higher interest rate environment we are entering.”
Last but not least, focusing on another angle, CoinSpot’s Head of Marketing, Ray Brown, wanted to address some security claims being put forward out there in the crypto ether (if you’ll pardon the pun). Claims that suggest the merge to PoS could make Ethereum somehow less secure as a network.
“While there are a couple of reasons for this line of thinking, it is likely that these concerns aren’t very significant,” noted Brown.
“The Merge will, in all likelihood, actually lead to a more secure chain with the ‘mainnet’ (or Proof-of-Work) version of the Ethereum blockchain to be shut down.
“Previously, it had been operating as the central chain while the Beacon chain version was being utilised simultaneously to test the Proof-of-Stake functionality.
“With the conclusion of this phase of the Merge, all transactions will now operate on only one chain, as opposed to two. This will theoretically insulate ETH from more hacking attempts than its current protection, as there will now be fewer ‘access’ points and discrepancies between the two systems for hackers to exploit.”
And what about price-volatility expectations?
“As we’ve said before, Ethereum is offering a very high bounty on bug hunting, which indicates that they do anticipate some growing pains post-Merge.
“So this, combined with a value proposition that is yet to come true means investors could anticipate some price volatility in the weeks following the Merge’s conclusion.”
How do you see The Merge affecting other aspects of the crypto market? Bitcoin?
“ETH has long been the ‘Number 2’ cryptocurrency in terms of value and cultural relevance, with Bitcoin synonymous with cryptocurrency as a whole.
It remains to be seen whether The Merge will have any real impact on Bitcoin’s dominance in the long-term. If it proves to be successful, an increased popularity of Proof-of-Stake chains could shake up Bitcoin’s dominance.
“And that’s because the leading crypto is effectively married to a Proof-of-Work protocol which many are already hypothesising could grow more unpopular as demand for less energy-intensive solutions intensifies.
“The increased versatility of Ethereum could also work significantly in its favour over Bitcoin and if Ethereum’s utility as a smart-contract provider gains further traction, thanks to higher efficiencies and lower costs post-Merge, this could easily be reflected in a shift in market values.”
“That said, a massive shift in the crypto space is not likely to occur overnight,” Brown concluded.
With thanks to all these crypto-exchange representatives for their insights. Note: some of these interviews were edited lightly for clarity.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees/respondents.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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