11 Sep – Is ETH2.0 Really Bullish?

Looking at the upcoming ETH Merge, ETHPow, and NFTs

We're less than a week away from the ETH merge. ETH's price shows no letting down, as it has went steadily from a low of $1400+ to over $1700 today. Will this momentum halt, or perpetuate with the merge to come?

I found this article that summarized the ETH merge really well. The main points that I'm concerned about with this merge are:

  • ETH moving into POS involves three parts – the beacon chain, the merge, and then sharding

  • Merge makes ETH 99.9% more energy efficient

  • But gas fees will not actually come down – that will come with sharding, which is expected in 2023/2024

And the next must-read article is definitely Arthur Haye's article on why the merge is extremely deflationary, and has the equivalent of a "triple-halving effect". TLDR is a bullish ETH, but the amount it can rise to depends on macro economic factors on how loose the monetary policy will be.

Seeing the price action of ETH, and how ETHBTC looks to be breaking a major resistance, it's hard not to be bullish about ETH. Technical wise, it suggest that in the short-term, ETH will likely outperform BTC. Many OGs will question whether this will be a "flippening" moment when ETH's market dominance finally overtakes BTC, and I'm agnostic to that view. If it happens, it just does.

With the above considerations, and the fact that on-chain data have shown that both big and small wallets have started to accumulate, it just spells for a bullish Ethereum. Whether it breaks the major resistance of $2,000 is another question.

What About ETHPoW?

One thing I discussed about in my last article is how ETH will inevitably fork into ETHPoW and the main ETH chain shifting to PoS. In the past BTC hard forks, the forked token usually carry way lower value than the officially recognised token – and it should be no different this time.

In fact, if you were to consider the long-term picture:

  • Most exchanges, projects will build on the main PoS ETH

  • Transactions will mostly happen there, and activity, development will all be on the PoS chain

  • As a result, value accrued will inevitably be on the PoS chain

  • In comparison, yes, there will still be some transactions, and miners will still favour the old chain,

  • But if it offers no significant benefit, and it's more energy-depriving, people will slowly move away

  • As more people move away, development and transaction ceases, it also inevitably means that the chain will fade in the long run

So will there be some trading value to the ETHPoW? Definitely. Is it something you want to keep long-term? Probably not. However, in the short-term, there will be massive volatility and speculation, likely plenty of debate too, which can be a good trading opportunity.

What About NFTs?

Previously, I've also hypothesized that most people will prefer to hold ETH, whether it is to get their free ETHPoW, or to ride out the uncertainty. As such, that led to the massive decrease in NFT trading volume.

Yes, NFT trading volume has hit a new low. However, this is not to say that they're dead. Seeing some of the upcoming launches and development in the top-tier "blue chip" projects, it feels as if they are priced for a new surge in interest, new surge in demand, and hence increase in prices. Now, is it better to buy NFTs after the merge happens (or if it fails)? I can't say for sure.

Having said that, the fact that many of these "blue chips" have come off their lows and held their floor prices decently, it might suggest that interest in NFTs has been sustained. Should there be development or news that attract new capital, a second NFT bull market should not be ruled out.

Having been running Intro To NFT classes, following the closer updates on many of these top-tier NFT projects, and hearing Haye's view on how NFTs are a manifestation of our culture, I've never felt less bullish about NFTs. To me, it's an under-appreciated tool, it's heavily misunderstood, and it will only be a matter of time before the market realises the true value of many of these NFTs.

I can't really predict what will happen next for ETH or for NFTs, but being active in this space, it just feels like adoption will be inevitable. Right now, the best way is to get involved, or get learning about many of these basic concepts.