Ethereum Merge has turned out to be the most important event in the crypto industry this year. Analysts and keen observers believe that it will have a huge impact on all sectors of the blockchain industry, such as decentralized finance (DeFi), non-fungible tokens (NFT), and Web3 games. So how will this all affect the Ethereum price?
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What is Ethereum Merge?
Ethereum is a second-generation blockchain project based on the Proof-of-Work (PoW) principle. Over the years, many industry experts have concluded that while PoW is a secure framework, it has tremendous limitations.
For example, it is a very energy-intensive process that requires computers with advanced GPUs. In addition, transactions using this technology are very slow and expensive. The average cost of an Ethereum transaction today is about $15.
Therefore, Ethereum developers decided to start a gradual process of upgrading, which is called ETH 2.0. The goal was to move from proof-of-work to proof-of-stake (PoS). PoS blockchains rely on validators to confirm transactions.
In 2021, developers introduced the London Hard Fork, which introduced several features to the network. This is expected to make transactions faster, plus prospectors will have more incentives. For example, they will no longer receive transaction fees from the network. Another goal is to turn Ethereum into a deflationary platform.
Another important phase of Ethereum 2.0 was the introduction of the Beacon Chain. This chain brought staking to Ethereum. According to Staking Rewards, users have already invested over $32 billion worth of Ether coins.
When will Ethereum Merge take place?
Ethereum Merge is expected to take place in May or June this year. The goal is to merge the current Ethereum mainnet with the Beacon Chain – also the Proof-of-Stake network. This will mark the end of Ethereum’s proof-of-work principle.
Following this, sharding technology will be introduced to increase the speed of Ethereum. This is a process where blocks are split into smaller pieces called shards. In this way, throughput is increased, i.e. the number of transactions per second.
Sharding has already been used extensively by other blockchain projects such as Zilliqa, Near Protocol, Elrond and Polkadot. As a result, the number of transactions within the ETH blockchain is expected to increase from less than 20 to more than 1,000 per second.
As a result, analysts expect the Ethereum price to perform well in the coming months as the merger proceeds. For one, it will lead to more DeFi, NFT, and gaming projects on the platform.
The latest development regarding ETH 2.0 is that the Ethereum Foundation has conducted a big test to check its performance. So, should you take advantage of the situation now and buy Ethereum?
Ethereum Price Forecast
On the weekly chart, we can see that the ETH price has been struggling lately and has fallen below the Fibonacci retracement level of 38.2%. The cryptocurrency has fallen below the first support of the Andrews Pitchfork tool. It also seems that the price has formed a head and shoulders pattern, which is usually a bearish sign.
Therefore, there is a chance that the Ethereum price will remain under pressure until the merge time. I then expect it to resume the uptrend and possibly reach its all-time high at $5,000 again.
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