Why The Ethereum Merge Will Shoot UP the Price of ETH

With any PoW (proof of work) coin, the miners have to pay their electricity bills each day by selling their coins. Once ETH moves to proof of stake, the electric bills go down by 99.7%. Less selling pressure each day.

Because proof of stake requires miners to stake coins, that removes those coins from supply. In every test case where proof of stake has been tried , supply of ETH has gone down. Less supply and EQUAL demand = price goes up.

This has already been happening but will happen more as ETH goes up: part of every gas fee means more ETH is burned according to the "London Upgrade" that happened in July, 2021.

SInce ETH will presumably be faster (PoW takes longer to calculate than PoS), ETH will be more scalable and more projects will want to use ETH. ETH already has more transactions per day than BTC and with increased scalability and less energy usage demand will go even higher. Demand up + Supply down = ETH will go up.

Because staking Ethereum will be rewarded with more ETH, investors will want to stake their ETH. But in order to stake it, you have to buy it. So more buying pressures.

ABout $10 billion a quarter is being invested by venture capital firms in crypto projects. With the ETH merge (and the fact that ETH is used for about 95% of crypto projects), more projects will launch than ever before. $50 billion has been invested this past year on projects that will launch within the next year or so: Defi projects, real world use cases, NFT projects, etc. This will increase demand.

Sharding decentralizes the data so not every validator has to have all of the data. It's a bit tricky so I wont 'explain it all here but sharding means ETH becomes much more scalable. It's estimated that the number of ETH transactions per second could go from a small 13 to a huge 100,000 (Visa is at 65,000). Scalability will increase demand because potentially ETH can be used as a currency for transactions.

This may or may not occur but will probably reduce supply slightly. Part of ETH 2 is that a validator of transactions risks losing their staked coins if they validate a fraudulent transaction. With PoW, the risk of validating a bad transaction is you have to eat your electricity costs. But with PoS, you could lose your stake.

So two things occur: some stake will eventually get burned because of this. But also, the risks go up, so there is more incentive to triple check any transactions being validated. So the increased safety could increase demand.

This is just speculation on my part but I think many people are waiting for ETH 2.0 to happen before investing. Partly because this is the advice many pundits on TV are giving.

That said, interest has gone up significantly. Here is the Google Trends chart on the search "Ethereum Merge" over the past 12 months.

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This is a very good thing. It means that some people who hold enormous influence will have to change their tune publicly once the merge happens and this wll drive buying interest.

For instance, Kevin O'Leary (Mr. Wonderful on Shark Tank, and the founder of WonderFi) said to me on my podcast the merge will never happen. Not sure why he believes that.

Meanwhile, the merge has recently completed several successful large-scale tests and is now scheduled for September 19. This merge will happen. Maybe not in Sept but it will happen, which will generate new buying interest.

Usually ETH price follows BTC price. But over the past week (since the latest ETH Merge test and the announcement of a scheduled date for the merge) ETH price has gone up 7.4% and BTC has gone up a little over 1%.

This is a short term trend so probably doesn't mean anything but I am watching to see if it continues.,

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