The "Triple-Halving" Ethereum Merge. Is It Priced In? 14

The “Triple-Halving” Ethereum Merge. Is It Priced In?

On March 11,2022 our editors covered a Reddit thread, describing reasons why the Ethereum merge is very likely to happen in June 2022. We don’t normally take Reddit threads as gospel, but this comes from an active member of the Ethereum community Superphiz.eth who has been following the upgrade much more closely than most people have. 

Feel free to read the full five reasons laid out by Superphiz on Reddit here. For the TLDR readers out there I will provide a summary for you below.

Summary of Reddit Thread

Reason 1: February 19, Eth researcher and implementation organizer Danny Ryan gave a talk to Ethdenver. So Wen? He asks and proceeds to answer the question. He continues to say, “it is really actually very close,” “the difficulty bomb is set to go on sometime in June.” 

Reason 2: On a Consensus Layer call, March 10, 2022, Danny Ryan hints that they are closely monitoring any delays and are mindful of delays.

Reason 3: The Merge Mainnet Readiness Checklist is nearing completion. The most difficult items are already complete.

Reason 4: On March 10, 2022, Marius Van Der Wijden announced the launch of the Kiln public merge testnet. Widely expected to be the final one-off testnet.  This launch was proven to be successful today on 16 March 2022.

Reason 5: The difficulty bomb is specified in EIP-4345 and suggests that the time between blocks will begin increasing around June 2022

It looks like the pawns are all set up, and it is extremely likely that the merge will likely occur in June. June is only three months away; bear that in mind. 

We are about to witness one of the most significant blockchain upgrades in history, the move of a Proof of Work network to a Proof of Stake network. Unless you follow Ethereum updates closely, you are likely to miss out on this. This may mean that the effects of this merge could not be priced in YET.

What will happen Post-Merge?

Currently, there is pressure for retail Proof of Work Miners to sell a significant portion of Ethereum to cover their electricity costs. These POW miners are earning 12,000 ETH. Ethereum is due to undergo a 90% cut of daily emissions. 

Proof of Stake Validators Post will earn 1,280 ETH per day, meaning that they will have no reason to sell their ETH to cover electricity costs. This will reduce sell pressure on Ethereum MASSIVELY.  

Once the merge is complete the yield from PoW to PoS will increase from 4.8% to approx 10-15%. These will incentivize users, to hold and stake ETH. 

Yeary inflation will go down from 4.3% to 0.43 % – this is equivalent of three halvenings at once.

PoS validators will go up from 4.5% to 10-15% Post merge.

What we are witnessing is what they call the triple-halving. Have other cryptocurrencies undergone something similar?

Bitcoin underwent halving when BTC rewards decreased from 12.5 BTC to 6.5 BTC. On that day the price of Bitcoin was $8,800, over the next 6 months after that, it tripled in price. This was the effect of just one halving. Imagine the effects the Ethereum triple halving will have.

Is it Priced in?

There is currently extreme bearishness in the crypto markets as well as in the stock market.  The fear of war, inflation, nuclear war, and the sharp decline of most markets have put most investors off risky assets. The effects of this merge may not fully be priced in, initially because the average retail investor does not fully understand the concepts of the reduction in sell pressure this merge will provide, but also because fundamentals of the merge are ignored in risk-on periods such as this.

We do not know the full effects of the merge, but we respect the huge significance it will have in the crypto markets.