The long-promised and frequently delayed "Merge," a technical change in how it operates, was eventually completed by the Ethereum blockchain, which underpins much of the cryptocurrency industry, last month, and Ethereum price surged. So, how can cryptocurrency follow the market? Is it time to buy ETH?
About Ethereum Merge and its Price
One of the most popular digital ledgers in use today, the Ethereum blockchain serves as the foundation for Web3, non-fungible tokens, and decentralized finance. While the Merge is unquestionably excellent for the environment, it also highlights other issues with the Ethereum network.
Ethereum previously employed the "proof-of-work" consensus algorithm. In order to add a block of transactions to the blockchain, so-called "miners" must repeatedly estimate the number, consuming massive amounts of electricity to run their computers. After that, bitcoin is given to the victorious miners as payment for their efforts.
Ethereum’s transition to a “proof-of-stake” method avoids these environmental consequences. As of right now, Ethereum employs an algorithm that chooses a new block creator at random. The candidate is picked from among those who have staked their ether (the native coin of the Ethereum blockchain) in exchange for the opportunity to perform the work and get payment for it. One's chances of being selected to build the new block increase with the amount of ether they stake.
It is plausible to assume that any blockchain that uses proof-of-stake would start to concentrate the ability to process transactions in just a few hands. This generates incentives to acquire even more ether. According to data supplier Nansen, staking is already a highly centralized sector with some of the biggest corporations, like Coinbase. It appears that more centralization is coming.
Keep in mind that the entire purpose of a blockchain with a consensus mechanism is to avoid the need for centralized middlemen to validate transactions. Without true decentralization, one must question whether Ethereum's other issues are worth it.
The legal ambiguity surrounding ether's validity has increased as a result of the switch to proof-of-stake. The Securities and Exchange Commission does not have power over "digital commodities," such as ether, according to a measure that US Senator Debbie Stabenow put out before the Merge (in the US, securities are regulated by the SEC, whereas the Commodity Futures Trading Commission has oversight over the commodities markets).
A stronger argument can be made that ether are securities and not commodities now that stakers pool their ether in the hopes of receiving compensation from the gas fees associated with the Ethereum blockchain. Ethereum's boasts about its benefits and decentralization may not sit well with the SEC.
How to buy cryptocurrency following the market? Is it time to buy ETH?
One may argue that any form of forward-looking prognosis is likely to be inaccurate given the continued difficulties in predicting monetary policy actions and the fact that the majority of experts continue to underestimate the level of inflation we are now facing. This is how forecasts work.
Nevertheless, there is a growing consensus that as the Federal Reserve makes a mistake, interest rates may be set to decline in the medium run. A return of cheap(er) capital to the economy could be the spark for a further increase in valuations for risky assets like cryptocurrencies. However, suffice it to say that there is currently a lot for investors to consider. We'll have to wait and watch what transpires in the upcoming months and quarters.
