Welcome to the Three Ts with CoinJar. Each fortnight we explore a big Theme, an interesting Trade and some good, old-fashioned Technical Analysis (courtesy of Carl Capolingua of Thinkmarkets Australia).

Urge to Merge

Well, it has taken its sweet time, but the Ethereum Merge is almost upon us.

The network’s long-trumpeted, often-delayed transition from Proof-of-Work to Proof-of-Stake was first due to happen in 2019, but the Ethereum devs made the sensible decision to keep pushing back the launch date until they could be sure that they could make the change without completely crippling a multi-hundred-billion dollar financial network. NO PRESSURE.

The change is scheduled for block 15,540,293, expected next Thursday, but miners are making the most of these last few days in the land of milk and honey, so the actual date could be as early as Tuesday.

So, what does the Merge mean for you, the humble crypto investor? Well, the banner headline is a roughly 90% reduction in the amount of new ETH being produced. By way of comparison, it takes Bitcoin three Halvings to see a 90% drop in issuance – hence people referring to the Merge as a Triple Halving event.

But perhaps more significantly – at least as far as Ethereum ever becoming a true world computer goes – is the two thousand-fold reduction in the network’s energy usage. Yes, that is a 99.95% drop, taking it from using the same amount of electricity as the Netherlands to that of a mid-sized town.

Sure, that might not be the immediate catalyst for ETH’s next bull run. But it removes one of the most potent barriers preventing institutional adoption and mainstream acceptance. When the crypto markets fire up again, being green will count for a lot.

Layer 1s or Layer 2s?

One thing the Merge isn’t going to have any discernible impact on is Ethereum’s famously small transaction capacity and the crippling gas fees that come with it.

While gas fees right now are historically low – the average gas price is the same as it was in early 2017, which gives you some sense of how deep we are in the bear market – everyone knows that it’s just a matter of time before some new frenzy happens and then next thing you know it’s costing $80 in fees to buy a JPEG on Opensea.

There are plenty of so-called Layer 2s busy trying to solve Ethereum’s scaling problem – and Ethereum hopes to start solving it next year anyway – but one of the frontrunners is Arbitrum, a network that uses ‘optimistic roll-ups’ to deliver fast and cheap transactions.

On the back of a successful upgrade to a new mainnet called Nitro (now the transactions are even faster and cheaper!) the Arbitrum hype machine has gone into overdrive. But here’s the catch: Arbitrum doesn’t have its own token yet.

This leaves you with two options. One: start using Arbitrum like crazy in the hope that any airdrop rewards those who have conducted many transactions on the network. Or two: take some pocket money and throw it at some of the platforms being built on top of Arbitrum.

These are, you must understand, ultra-risky small caps that will be lucky to survive more than a couple of years. But ecosystem narratives are strong in crypto and if Ethereum takes the spotlight after the Merge, a rapidly maturing L2 like Arbitrum could be swept along in the current.

Brace yourselves

Unfortunately that level of excitement isn’t being reflected on the charts, which look, according to Carl Capolingua from ThinkMarkets, properly woeful.

Of the 130 crypto charts that Carl is tracking, only four of them didn’t absolutely rollover on the most recent sell-off, signifying a disturbing degree of market-wide apathy.

Bitcoin led the charge downward and is now looking set for a date with destiny at the previous low around US$17.5k. Can it withstand another assault? It better, because after that the next real support cluster is US$13.8k and that would be, well, unfortunate.

Image: Thinkmarkets

Ethereum is looking marginally better, but only because the imminent arrival of the Merge is giving buyers a reason to believe. However, ETH’s inability to hold above the supply zone at US$1700 paints the same picture as every other crypto and it ain’t a pretty one. If the Merge hype wears off, expect a visit to the demand cluster at US$1420 and following that, gulp, US$880.

Save us, Triple Halving! You’re our only hope!

Image: Thinkmarkets