The cryptocurrency market fell below $1 trillion on Wednesday, losing more than $100 billion in value ahead of one of the most anticipated events in industry history.
Dubbed “The Merge,” the event will see Ethereum transition to a new mining model that will reduce its power consumption by 99.9%.
The world’s second most valuable cryptocurrency currently operates on a proof-of-work model, pioneered by bitcoin, but environmental concerns have led to a push towards a more sustainable system known as proof-of-stake.
The technical complexity of the change has caused numerous delays, although the process is already underway and should be completed sometime on Thursday.
There has been significant speculation over whether the Ethereum merger will cause price swings for the cryptocurrency, with some cryoto analysts warning that any issues with the change could prove tumultuous for the wider market. .
“The merger is, by far, the most impactful event that has happened in the crypto industry so far and is considered a very positive event by most crypto investors,” Marcus said. Sotiriou, an analyst at digital asset broker GlobalBlock. “However, there are significant risks that could make the event messy in the short term.”
Mr. Sotirou cites the lack of preparation of operators within the Ethereum ecosystem as an example of a potential problem, while warning that unexpected complications can also arise and drive investors away.
“The merger is such a complex technical event, surrounding not just one big company, but a whole decentralized network, so there are reasons why it may not go as well,” he added. .
“Nevertheless, the long-term implications, in my view, will be extremely beneficial for Ethereum and the wider crypto space… Reduced power consumption and yield post-merger could be a significant catalyst for Institutions are entering the crypto space in droves over the next five years, but the short-term risks associated with the transition could mean we have a hectic week ahead.