The Ethereum 2.0 Merge

What is Ethereum 2.0?

With Ethereum 2.0, known as Serenity, ETH will soon transition away from Proof-of-Work (PoW) algorithms - also used in Bitcoin mining. Instead, it will move towards Proof-of-Stake (PoS) and Ethereum staking. The upgrade will bring changes that will, according to Ethereum, make the currency "more scalable, more secure, and more sustainable".

The Ethereum Merge Date

Ethereum's final Merge date is scheduled for September 15/16. The upgrade will shift the blockchain to PoS consensus, thereby slashing its energy consumption in half.

After The Merge, Ethereum Triple Halving will add deflationary pressure on ETH, which can affect its supply and prices.

As is the name, the Triple Halving consists of three elements: reduced issuance, burning, and staked ETH.

The major change from the current blockchain will see the amount of Ethereum issued through staking to mining drop. As noted by former blockchain engineer Montana Wong, the net annual ETH issuance will drop to 0.4% from 4.3%, roughly an issuance of 1500 ETH per day.

Second, comes the burning. Ethereum burning has been a major part of ETH since the EIP-1559 upgrade, and will continue to counteract some of the inflationary tendencies of ETH by burning some of the transaction fee.

And finally, is staking. Ethereum staking mechanics mean that stakers will not be able to withdraw any of their staked coins until at least six months after the merge, at which point a queue will allow for a gradual withdrawal. This effectively reduces the circulating supply temporarily, too.

Ethereum 2.0 Price Speculation

Many Ethereum holders, as well as speculative traders are wondering how the upgrade will impact the price of ETH and how this can be profited from.

Ethereum's co-founder Vitalik Buterin has touched upon this in an interview with Bankless.

“I basically expect that the Merge is going to be kind of not priced in, by which I mean not even just market terms, but even just psychological and narrative terms.”

Meanwhile, other Ethereum holders are hoping to see the flippening - a fabled event in which Ethereum would overtake the Bitcoin market cap. Currently, the Bitcoin market cap is double that of Ethereum.

How to trade the merge with Alpha on September 15/16

As mentioned above there is not a concrete opinion on what will happen to the price of ETH before, during and after the merge. However you can gain an edge by viewing how ETH is being traded across many of the top centralised exchanges.

Above you can see a workspace configured to show ETHUSDT across a few different exchanges, being able to see how one market reacts before another will be key during the merge. Use the flagging function on our ladders to highlight price levels with significant size, this may give some indication as to where the bigger players are looking to be active in the market.

Closing thoughts

The Merge is the second in a series of significant upgrades to the Ethereum network. After completing all listed upgrades, Ethereum will likely be primed to take on more transaction loads without compromising security or decentralisation. Something to consider moving forward into 2023 is the relationship between ETH and BTC that has historically shown ETH to be the lesser currency, will this change?

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