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Ethereum 2.0 price prediction: Can ETH surge after The Merge?


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Ethereum 2.0 logo, which depicts a blue pyramid in reflection, on dark background
Experts expect Ethereum 2.0 to make ETH more attractive by reducing its circulating supply – Photo: Shizume / Shutterstock.com

Ethereum’s long-awaited transition to the proof-of-stake (PoS) consensus mechanism has been touted as the biggest event on the cryptocurrency markets in 2022.

The highly-anticipated upgrade, known as Ethereum 2.0 or “The Merge”, took place on 15 September 2022, and is expected to help the second biggest cryptocurrency by market capitalisation achieve its long-term sustainability goals in terms of scalability and adoption.

Industry experts expect Ethereum 2.0 to make Ether (ETH) more attractive by reducing its circulating supply and making it “net-deflationary”. On the flipside, Ethereum 2.0 is not expected to immediately address the network’s high gas fees.

No one can be entirely sure what might happen now The Merge has taken place. One potential unintended consequence might come in the form of crypto regulation. A case filed by the United States Securities and Exchange Commission against crypto investment trader Ian Balina hinted that the SEC could well consider the coin to fall under its remit. The papers said: “ETH contributions were validated by nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.”

The news comes after reports that the SEC chairman, Gary Gensler, believed the change to proof-of-stake made it more likely that ETH will be considered by the SEC to be a security.  

In this article, we take a look at Ethereum 2.0 to understand how the upgrade might affect ETH and the market as a whole, and examine some of the Ether (ETH) price predictions that were being made as of 30 September 2022. 

What is Ethereum 2.0?

Before 15 September 2022, Ethereum used the proof-of-work (PoW) consensus mechanism. The smart contract platform transitioned to a proof-of-stake (PoS) chain in an upgrade known as The Merge or Ethereum 2.0 at around 7.45am BST (+ UTC) on 15 September.  

To fully understand Ethereum 2.0, we need to go back to 1 December 2020, when Ethereum released a new consensus layer called the Beacon Chain. According to its website, the Beacon Chain is a ledger of accounts that conducts and coordinates the network of stakers. 

However, the Beacon Chain does not process transactions or handle smart contract interactions as the Ethereum Mainnet does. The Beacon Chain is currently live but exists as a separate chain from the Mainnet.  

Ethereum said: “The plan is to swap out the current proof-of-work algorithm on the execution layer today and replace it with the proof-of-stake consensus protocol that the Beacon Chain provides. This process is known as The Merge, as it will ‘merge’ the new consensus layer with the existing execution layer and stop the use of mining.”

Despite its transition to PoS, Ethereum’s native token will continue to be referred to as Ether or ETH. ETH 2.0 or ETH2 tokens do not exis

Ethereum said in a blog post: “Some staking operators have represented ETH staked on the Beacon Chain with the ‘ETH2’ ticker. This creates potential confusion, given that users of these services are not actually receiving an ETH2 token. No ETH2 token exists; it simply represents their share in that specific providers’ stake.”

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Ethereum 2.0 expected to reduce ETH supply

Ethereum’s transition to the PoS consensus mechanism should make its blockchain more scalable, accessible and less energy-intensive compared to its PoW model. But how will ETH prices react to the long-awaited update?

Now that PoS has replaced PoW as the consensus mechanism, miners are being replaced by stakers, who will have to lock up their ETH tokens in smart contracts to earn staking rewards from validating transactions. According to Ethereum, a validator must stake at least 32 ETH on the Beacon Chain.

A report by the Switzerland-based crypto-financial service provider Bitcoin Suisse said that staking will reduce the circulating supply of ETH. As of 29 August 2022, almost 13.7 million ETH had been staked on the Beacon Chain, thereby removing more than 11% of the coin’s total circulating supply. 

It also should be noted that an Ethereum improvement proposal (EIP) called EIP-1559, which introduced burning of base gas fees in 2021, has already reduced the coin’s circulating supply.

“Combined, staking and fee burning have a dampening effect on the supply of ETH. Some argue that with these changes, Ethereum is moving into a deflationary monetary policy that is stronger than Bitcoin’s inflation reduction over time, leading to ‘ultra sound money’ in the end,” Bitcoin Suisse said.

Investors will see Ethereum’s progression towards a deflationary monetary policy as a bonus on top of its status as the leading smart contracts platform. Moreover, Ethereum’s move to PoS will make the network less scrutinised with regards to its energy consumption. According to Ethereum, its energy consumption will be reduced by “about 99.95%” after The Merge.

European authorities have been pushing to limit the use of PoW networks such as Bitcoin because of their high energy consumption and carbon emissions. Harvard Business Review reported that Bitcoin’s annual energy consumption was equal to that of countries like Malaysia or Sweden.

Bitcoin Suisse was cautious about ETH’s deflationary supply, calling it a “double-edged sword” for Ethereum, whose ambition is to be a “world computer rather than a world currency”.

“Tightening the ETH supply because of staking may be good for investors, but it is less beneficial for those (many more) people who want to develop, run, and use smart contracts on Ethereum because it makes much more expensive measured in USD or other fiat currencies. Cheap gas is good for driving, not for investing in the oil industry,” Bitcoin Suisse said.

On 6 July 2022, Sepolia, the second of three Ethereum public testnets, completed its transition to PoS. Investors will be hoping that Goerli, the last Ethereum public testnet, and the Ethereum Mainnet will successfully transition to PoS without any hiccups in the second half of 2022.

“Based on the last 30 days of network revenue – which is at lowest since the summer 2021 thanks to the correction and fee burns – ETH is expected to be net-deflationary, with its supply projected to decrease 0.6%,” Bankless said, in a newsletter published on 7 July.
“Coupled with the removal of structural sell pressure due to the upgrade from miners to validators, this represents a significant improvement to the long-term value proposition of ETH.”

Ethereum’s transition to PoS will not address the network’s expensive gas fees. According to Ethereum, scaling solutions such as layer-1 solutions and layer-2 roll-ups will be used to make transactions on the network cheaper.

Ethereum said: “The transition to proof-of-stake is a critical precursor to realising [cheaper gas fees].”

It is worth noting that, according to data from Ultrasound Money, the rate of ETH issuance has dropped considerably since The Merge. 

ETH price slumps amid crypto winter

Let’s take a quick look at the ether price history. While past performance should never be taken as an indicator of future results, knowing what the coin has done in the past can help give us some much needed context if we want to make an Ethereum price prediction of our own. 

Over the years, the ETH price has been on a volatile ride with multiple peaks and troughs. Most notably, ETH’s first major bull run came around the time when BTC hit a then-record high of about $20,000 in 2017.

Ethereum to USD historical price chart, 2015 - 2022

ETH/USD

1,309.33 Price
-0.240% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 5.00

BTS/BTC

0.00 Price
0.000% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 0.00000002

BTC/USD

19,290.80 Price
+0.000% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 60.00

XRP/USD

0.48 Price
-0.310% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 21:00 (UTC)
Spread 0.00600

On 13 January 2018, ETH rose to hit a then-record high of about $1,419, having seen three straight months of gains in the last quarter of 2017. However, over the next year, ETH would go on to lose more than 90% of its value, and fall to $115 by 13 January 2019.

It would take roughly three years for ETH to pass its 2018 high, after the cryptocurrency saw a positive shift in investor sentiment in 2021. ETH surged 580% from $737 at the start of the year to an all-time high of $4,891 in early November 2021.

It has been a rough year for the coin in 2022, however, amid a wider slump in cryptocurrency markets. ETH prices saw 11 consecutive weeks of losses between April and mid-June amid tightening monetary conditions globally, the collapse of the Terra ecosystem and the bankruptcy of several crypto-native firms. 

On 18 June 2022, ETH hit an 18-month low of $879.

Preparing for The Merge

On 8 September 2022, after completion of the Bellatrix upgrade – the work that would provide the basis for The Merge – and news that Swiss bank SEBA was to offer its customers access to ETH staking, the coin was worth about $1,625. As anticipation for The Merge grew, and the news came out that the Kiln, Ropsten and Rinkeby testnets were to close, ETH traded at about $1,725 on 9 September.

Google then installed a counter on its Ethereum Merge search page which suggested that The Merge could take place in the early hours of 15 September. On 13 September the price stood at around $1,710, but market conditions saw a drop across the following 24 hours or so and, on 14 September, the ETH price stood at around $1,610.

Once The Merge took place, ETH rallied somewhat and was trading at around $1,630 on 15 September. Over the next few days, though, the price slid and, by 20 September, it was worth about $1,360. dropping to around $1,275 the following day.  By 23 September, it had recovered somewhat to around $1,340 before dropping over the weekend to trade at around $1,290 on 26 September 2022. Over the course of the next few days, the coin made something of a recovery, trading at around $1,340 on 30 September. 

The token has lost about 65% year to date but ETH is still the second-largest cryptocurrency, with a market capitalisation of about $164bn.

Data from the analytics firm IntoTheBlock revealed that the concentration of ETH held by large holders was at 40% of circulating supply as of 23 September 2022, against BTC’s 10%.

What could happen after The Merge?

We still do not know what might happen now that The Merge has taken place. It is important to be cautious, because it is always possible there could be glitches in the new system.

If that happens, then Ethereum could suffer significant reputational damage, potentially causing a crash that could devastate the cryptocurrfency market as a whole. Even if that crash does not happen, there is a risk that The Merge could cause liquidity problems for the many decentralised finance (DeFi) protocols that are based on Ethereum.

Many, if not all, non-fungible tokens (NFTs) are based on Ethereum, so there is the risk that fake tokens could end up on the market. There is, in addition, always the general risk of airdrop scams and support scams swindling people out of their money. 

While many developers and investors may have been looking forward to The Merge, there has been some understandable trepidation among another group of users. The system’s miners stand to lose out on a good chunk of income, so it is not a huge surprise to learn that a group of them ganged up to create something called ETHW, basically a fork of the exisiting ETH, which would maintain the proof-of-work consensus mechanism.

On 12 September 2022 the miners, calling themselves ETHW Core, announced that they would launch their mainnet within 24 hours of The Merge going live. This was confirmed by a tweet made not long after The Merge was confirmed, with ETHW Core also listing a number of mining pools beforehand.

The mainnet went live later that day and, on 16 September, the new fork was worth about $13.40, according to CoinMarketCap. By 20 September, it had fallen to about $7, and by 22 September it was worth about $5.90, recovering to somewhere around $6.20 the following day and hitting a high of $13.78 on 24 September. By 26 September, it had dropped to around $9.95. There was some recovery over the next few days and, by 30 September 2022, it was worth about $12.55.  We shall have wait and see what, if anything, ETHW does in the future. 

We should also point out that the possibility remains that, without proof-of-work, Ethereum could end up being seen as just another proof-of-stake blockchain. While the other big players in this field, such as Solana (SOL), Polkadot (DOT), Avalanche (AVAX), Tron (TRX) and Tezos (XTZ) have all seen their prices drop over the last three months, it will be worth seeing if there is a boost from the creation of The Merge, or if ETH drops as a result. 

Ethereum 2.0 price prediction

Let's now take a look at some of the ether price predictions that were being made as of 30 September 2022. It is important to note that price forecasts, especially for something as volatile as cryptocurrency, are often wrong. Many long-term cryptocurrency price predictions are made using an algorithm, which means that they can change at a moment’s notice.

As of 23 September 2022, CoinCodex was rather downbeat in its near-term Ethereum 2.0 crypto price prediction, expecting ETH to fall to $1,303.34 by 5 October 2022 before dropping further to $1,134.41 by 31 October. 

LongForecast was also pessimistic in its Ethereum 2.0 price prediction for 2022. It saw ETH closing the year at $1,170. Its Ethereum 2.0 price prediction for 2025 suggested the token could trade at $1,572 by the end of the year.

DigitalCoinPrice held a more positive view in its long-term Ethereum 2.0 price prediction for 2030, expecting ETH to reach $18,573.81.

CoinsKid made an Ethereum 2.0 coin price prediction which saw ETH trading at an average price of $6,742.21 by December 2025.

Elsewhere, in its Big Ideas Report 2022, ARK Invest said that ETH’s market capitalisation could exceed $20trn in the next 10 years. 

The report said: “According to ARK’s research, Ether (ETH) is both the preferred collateral in DeFi and the unit of account in NFT marketplaces, suggesting that it is likely to capture a portion of the $123trn global money supply.”

Note that analysts’ and algorithm-based ETH crypto price predictions can be wrong. Forecasts should not be used as a substitute for your own research. Always conduct your own due diligence. Remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and investment goals.

Past performance does not guarantee future returns. Never invest money that you cannot afford to lose. 

FAQs

Is Ethereum 2.0 a good investment?

As of 30 September 2022, Ethereum was the second largest cryptocurrency network, with a market capitalisation of $164bn.

The smart-contract platform has just undergone an upgrade called Ethereum 2.0, or The Merge, which saw it transition from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one. The impact of this change on Ethereum as an investment remains to be seen.

Remember, you should always carry out your own thorough research before making an investment. Even high-market-cap cryptocurrencies have proved vulnerable to the current bear market. Investors should be prepared to make losses and never purchase more than they can afford to lose.

Will Ethereum 2.0 go up?

ETH has lost about 65% year to date, as of 30 September 2022, amid bearish cryptocurrency conditions. But the Ethereum 2.0 upgrade that went live on 15 September is expected to help ETH turn net-deflationary, which experts expect to be attractive to investors. We do not yet know, however, whether this will actually happen. 

Note that price predictions can be wrong, as there are always various factors at play. Always conduct your own due diligence and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and investment goals.

Keep in mind that past performance is no guarantee of future returns, and never invest money that you cannot afford to lose.

Should I invest in Ethereum 2.0?

This is a question that you will have to answer for yourself. Before you do so, however, you will need to conduct your own research. However, ETH is still ETH: the cryptocurrency has not changed, just the method of mining it.

Do not invest more money than you can afford to lose, because prices will go down as well as up.

Further reading

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