As of the 11th of August 2022, Ethereum has successfully completed its third and final testnet merger (Goerli), transitioning the Goerli testnet to the Proof-of-Stake (PoS) network. This means that all relevant testing is now done, and the long-awaited Merge upgrade to Proof-of-Stake is set to take place on the 14th of September 2022. The excitement surrounding the second largest cryptocurrency by market capitalisation is fuelling the industry with welcomed optimism. 

What is Ethereum 2.0? 

The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. 

Why does this matter? 

The Merge will allow Ethereum to move away from an energy-intensive Proof-of-Work (PoW) consensus network to an energy-efficient PoS consensus network that secures the network using staked ETH rather than mining. Six years in the making, this Merge milestone is expected to reduce energy consumption for the Ethereum network by 99.95%. 

Not only will it make Ethereum more energy efficient, but it will also result in Ethereum reducing its coin issuance by over 90%. This means that we will see Ethereum becoming more scarce and possibly deflationary in the months post-Merge.

Will the Merge cause the Ethereum price to rise? 

There are three primary reasons why people speculate a rise in ETHs price following the Merge: 

Firstly, by transitioning Ethereum to PoS, Ethereum will reduce its carbon footprint by over 99%. This reduction will make Ethereum an attractive investment for institutions that want to invest in ‘green’ investments.

Secondly, under the PoW consensus system, Ethereum has an inflation rate of over 4% a year. By transitioning to PoS, Ethereum will reduce its inflation rate to near 0%, possibly even becoming a deflationary asset (negative inflation rate). Simple demand and supply mechanics states if you reduce supply (reducing the inflation rate achieves this) while keeping demand flat or increasing demand, the price level of that asset will rise. 

Thirdly, PoW requires costly mining operations. With electricity prices rising worldwide, Ethereum miners are starting to feel the pressure of higher mining costs. To offset these costs, miners typically sell most of the cryptocurrency they earn from mining. This results in millions of dollars of Ethereum being sold into the open market and forcing the prices of Ethereum down. Once Ethereum moves to a PoS system, there will be no more miners, and that selling pressure will be reduced.

Ethereum’s price performance 

From the first testnet Merge in June 2022 to date (30th of August at the time of writing), Ethereum decreased in value by -13.68%. Therefore, while many think that the Ethereum Merge is already priced into the market and a substantial rise in value is unlikely, the price would say otherwise.

Regardless of your viewpoint, it is clear that the second largest cryptocurrency and its supportive community are confident in the future of Ethereum. 

Where can I buy Ethereum?

Cape Town-based crypto investment platform Altify, which is backed by JSE listed Sabvest offers exposure to Ethereum in 3 different ways: 

1. You can buy, hold and invest in Ethereum as a standalone investment product here.
   
2. You can own Ethereum through the Altify Top10 Bundle - an equally weighted Bundle that owns the top 10 cryptocurrencies by market capitalisation. Ethereum weighting: 10%‍
3. You can own Ethereum through the Altify Smart Contract Bundle - an equally weighted Bundle that owns the top 5 contract-focused cryptocurrencies by market capitalisation. Ethereum weighting: 20%