The entire crypto community held its breath. But “The Merge”, Ethereum’s big upgrade, finally went as planned, with no issues. The blockchain, of which ether is the native token, has successfully passed proof of work (work test) to proof of stake (proof of stake). This new transaction validation system allows for an operation that consumes much less electricity. However, ether has plunged 16% since “The Merge” in mid-September to around $1,350 per digital token.
A strong correction that should not worry about the long-term upside potential of the cryptocurrency. Karl Toussaint du Wast, co-founder of Netinvestment, which specializes in wealth management, and formacrypto.fr, which offers training in the world of cryptocurrencies, explains why.
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Capital: Why did the ether drop after “The Merger”, when this upgrade, which should allow the Ethereum blockchain to operate with much lower power consumption, went well?
Karl Toussaint du Wast: A correction in Ether was expected, this is not a surprise. The cryptocurrency also saw a real rally from 15 days to three weeks before the “Merge”.
In the crypto market, transactions are carried out a lot in an automated way, by means of robots. There had been the order to cut the positions during the update, on September 15. There was an autocorrect related to all positions that were unlocked. For investors, it is a way to take their profits. We are here in a purely speculative logic, very short-term.
Equity: Will Ether bounce back in the coming months or is it at risk of central bank tightening and financial market turmoil?
Karl Toussaint du Wast: In theory, and in essence, the cryptocurrency market should be decoupled from stock markets, because the philosophy of cryptocurrency is the exact opposite of centralized finance. But the more key central bank rates rise, the more it serves risky assets, including cryptocurrencies. The next six months will be difficult for all assets, stock markets, such as real estate or cryptocurrencies.
In any case, you have to look at a long-term investment and a term of 10 years, whatever the asset class. Last November, the crypto market had crossed $3 trillion in capitalization. There, it’s less than 1,000 billion, about 930 billion. Therefore, it is rather a good gateway to invest for several years.
Capital: Do you think that the capitalization of ether, of around 165 billion dollars, will eventually surpass that of bitcoin ($369 billion), whose blockchain still works and always works with proof of work?
Karl Toussaint du Wast : Everyone talks about flipenning (expression used to designate the moment when ether will surpass bitcoin, editor’s note). Bitcoin and ether are two different assets. On the one hand you have a store of value, bitcoin, which is like digital gold, and on the other hand an application, the Ethereum blockchain, from which ether is derived.
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Only 3 to -4% of human beings on Earth today use cryptocurrencies. The operational potential of the ether is gigantic. It’s ultra-scalable (large-scale deployable, editor’s note) and expansive. Its value will depend on the number of users while that of bitcoin is more linked to the number of holders. Ether will rise as blockchain technology adoption increases. And it could very well outperform bitcoin.
The Ethereum upgrade follows the flow of history. There are more and more blockchains that work with proof of participation, with the main advantage of being much more ecological.
Capital: What are the consequences of “The Merge” for users?
Karl Toussaint du Wast: The merger is a technological feat but has no consequences for users, who transact, use smart contracts (automated contracts on the blockchain, editor’s note), or hold NFTs purchased on ethers. You have no particular action to take. If you’re being asked to act on your wallet, it’s a scam (a scam, editor’s note).
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The Merger does not increase the volume of transactions or reduce the fees for these transactions. This is the first step in a long series of updates to the Ethereum blockchain, which will further improve its performance.