Podcast Summary
The Ethereum Merge: Bullish Analysts Share Reasons for Optimism: Two bullish Ethereum analysts predict price growth due to the Ethereum merge, a transition to proof-of-stake bringing significant supply changes, while the market remains cautiously bullish due to macro events and uncertainties. An industry conference discusses smart contracts and Oracles, shedding light on the latest developments.
The Ethereum merge, a highly anticipated event in the crypto world, is a topic of ongoing debate among experts regarding its current pricing in the market. Two bullish Ethereum analysts, Hal Presta and Ryan Beckerman, share similar reasons for their bullishness but differ in their time horizons. The merge, which signifies Ethereum's transition from proof-of-work to proof-of-stake, brings significant structural supply changes to the platform. While the bulls are optimistic, the state of the nation is cautiously bullish due to macro events and uncertainties. An upcoming conference, Smart Con, sponsored by Chainlink, brings together industry experts to discuss smart contracts and Oracles, offering insights into the latest developments in the space. The merge's impact on Ethereum's price and the timing of its full realization remain key topics of discussion.
Decentralized solutions in crypto: Lens, Rocket Pool, and Arbitrum: Lens is a decentralized social media platform where users own their keys and profiles, Rocket Pool lets users earn rewards by staking Eth and running a node, and Arbitrum provides fast transactions with cheap fees on Ethereum's layer 2. Ethereum bulls discuss the merge's potential, while Arbitrum's event offers NFT rewards for joining.
Lens and Rocket Pool offer innovative solutions in the crypto space, allowing for greater control and yield respectively. Lens is a decentralized social media platform where users own their keys and profiles, enabling them to take their followers with them across applications. Rocket Pool, on the other hand, is a decentralized Ethereum staking protocol that lets users earn rewards by staking their ETH and running a node, boosting their yield in the decentralized network. Arbitrum, an Ethereum layer 2 scaling solution, provides fast transactions with cheap fees and allows users to explore new frontiers in DeFi and NFTs. Both Hal Press and Ryan Bergman, Ethereum bulls, believe in the merge's potential in the long run, but they have differing opinions on the short term price action. Hal is more bullish in the short term, while Ryan is less so, attributing the uncertainty to external factors. Arbitrum's Arbitrum Odyssey event offers limited-time NFT rewards for joining the platform and completing on-chain activities. Overall, these projects and discussions highlight the exciting developments and opportunities in the Ethereum and crypto ecosystem.
The Merge's Impact on the Crypto Market: Short, Medium, and Long Term: The Merge in Ethereum, making crypto more eco-friendly and economically aligned, is a significant event impacting the crypto market in the short, medium, and long term. Experts differ on the macroeconomic situation's influence, but agree on its importance.
The merge in Ethereum, which aims to make crypto more environmentally friendly and align it with the real world economy, is expected to have a significant impact on the crypto market. However, there are short-term challenges, including Bitcoin's dominance, the Bitcoin maxi crew, and macroeconomic factors. Some experts believe that the macroeconomic situation is more influential than the merge, while others think the merge will outperform. The merge has already had an impact, but it's not fully priced in yet. The time frame for this impact can be divided into the short term (up to 6 months after the merge), medium term (6 to 12 months), and long term (beyond 12 months). The experts differ in their views on the macroeconomic situation and its impact on Ethereum, with some being more bearish and others more optimistic. Despite these differences, they all agree that the merge is a significant event that will shape the crypto market in the years to come.
Ethereum Merge: Not Fully Priced In Due To Complexity: The Ethereum merge, transitioning from proof-of-work to proof-of-stake, may not be fully priced in by the market due to its complexity and potential short-term gains for those who underestimate the execution risk.
The Ethereum merge, a significant event in the crypto world, may not be fully priced in by the market due to its complex and unique nature. The merge involves transitioning Ethereum from a proof-of-work to a proof-of-stake consensus mechanism, which is a structural flow catalyst. Structural flow catalysts are the hardest to price in as they require continuous action from market participants, and it's not practical for there to be someone doing the other side of that action every day. Hal, a market participant, believes that while the merge is not priced in as a binary, it might be more priced in now than it was a few months ago. Ryan, another market participant, agrees with Hal and emphasizes that many in the market are unaware of the merge's significance and the potential gains it could bring. He highlights the vast amounts of crypto paid to miners last year, which were driven by the proof-of-work selling schedule. With the merge, there's an opportunity for short-term gains as those who don't believe in the merge or underestimate the execution risk are disillusioned. Overall, the merge poses significant near-term gain potential, but its complex nature makes it challenging to price in fully.
The Ethereum merge: Unprepared industry braces for success: Despite skepticism, insiders believe the Ethereum merge will be successful, potentially yielding positive returns for those prepared to hold Ethereum before and after the event.
Despite the external world of crypto showing little interest in the Ethereum merge, there are still many in the crypto industry who are unprepared for its success. The merge, which has been anticipated for years, has faced much resistance and skepticism, leading to a consensus view that it will be a sell opportunity. However, insiders believe that the merge is highly likely to be successful, and holding Ethereum before and after the event could yield positive returns. The market, however, may be worried about execution and timing risks, leading to potential volatility around the merge date. Overall, the merge trade may not be as crowded as some may think, leaving room for those who are well-informed and prepared to capitalize on its success.
The Ethereum merge: Uncertainty in the market: The Ethereum merge is in a state of uncertainty with retail and institutional money slowly entering the market, but negative funding rates and lack of hot money positioning indicate it's not fully committed. Macro factors may impact the merge's success and Ethereum's price.
The Ethereum merge, which is anticipated to transition the Ethereum blockchain from proof-of-work to proof-of-stake, is currently in a state of uncertainty, with the market showing signs of being more crowded than it was two months ago, but not yet fully crowded. The speaker suggests that there is a slow trickle of retail and institutional money entering the market, but the lack of hot money positioning and negative funding rates indicate that the market is not yet fully committed to the trade. The speaker also notes that the success of the merge and its impact on Ethereum's price may depend on macroeconomic factors. The merge is widely expected to work due to the efforts of the community and the smartest minds in the industry, but there is still a chance of unexpected events. Overall, the market is in a state of uncertainty, and the outcome of the merge and its impact on Ethereum's price are unknowable. The speaker encourages listeners to subscribe to the Bankless newsletter to receive a detailed report on the merge thesis.
Ethereum Merge: Potential Price Increase and Long-Term Growth: The Ethereum merge, transitioning from PoW to PoS, could bring significant capital inflows, reduce miner sell pressure, and contribute to price stability and long-term growth.
The upcoming Ethereum merge, a significant event in crypto history, could potentially lead to a large influx of capital into the Ethereum market, causing a significant price increase. The exact amount of capital that could enter the market is uncertain and depends on various factors such as market sentiment, macroeconomic conditions, and the timing of the merge. The merge, which is expected to transition Ethereum from a proof-of-work to a proof-of-stake consensus mechanism, could also reduce miner sell pressure, contributing to price stability and potential long-term growth. The speakers also discussed the potential for increased market volatility due to supply inelasticity and the significant impact of fiat inflows and outflows on crypto market caps. Overall, the merge represents a structural shift in the Ethereum network and could have significant implications for the crypto market as a whole.
Ethereum merge's impact on Ethereum market: Approx. $3T inflows, half a billion new ETH issuance post-merge, potential reduction in Ethereum supply, and structural market dynamics suggest bullish outlook for Ethereum prices.
The Ethereum merge, which eliminates the need to pay miners and significantly reduces issuance, has the potential to significantly impact the Ethereum market. With approximately 3 trillion dollars in inflows waiting to enter the market and only half a billion dollars in new ETH issuance post-merge each month, the merge could lead to a net reduction in Ethereum supply. This reduction in supply, combined with the structural flow dynamics of the market, could lead to a bullish outlook for Ethereum prices. However, it's important to note that there are also potential counterbalancing factors, such as the selling pressure from those looking to exit their positions post-merge. Additionally, recent declines in Ethereum block fees may mean that Ethereum may not be deflationary post-merge, which could impact the analysis. Overall, the merge represents a significant structural shift for Ethereum and has the potential to lead to long-term bullish price action.
Ethereum's Lower Fees Impact Model Outputs and Adoption: Ethereum's lower fees make it a more user-friendly ecosystem, but decrease predicted staking rate post merge to around 5%. Real yield for Ethereum stakers will increase significantly post merge, making Ethereum more comparable to a bond.
The current state of Ethereum's fee revenue and demand for block space is lower than it was six months ago, but this isn't the whole story. While fees are currently lower and adoption may be easier due to the friendly chain environment, the impact on model outputs is negative. The predicted staking rate post merge is now around 5%, down from 9%, due to lower fees. However, this isn't all negative. Fees being low makes Ethereum a more user-friendly ecosystem, preventing significant adoption loss to other chains. Additionally, the real yield for Ethereum stakers will increase significantly post merge, from a real yield of 0.1% to potentially 5%, creating the first real yield in crypto. This shift towards real yield makes Ethereum more comparable to a bond, as investors consider both nominal and real yields when evaluating returns.
Real Yield vs Traditional Bonds: Ethereum's real yield from network earnings could attract external capital, but its inflation to miners under proof-of-work dynamic impacts the chain's market cap more than traditional bonds.
While traditional bonds offer a fixed principal payment at a certain date, crypto assets like Ethereum provide a continuous yield in the form of earnings or revenue generated by the network. This real yield could potentially attract significant external capital, especially from larger institutions. However, it's important to note that under the proof-of-work dynamic, Ethereum's mining costs scale with its market cap, hurting the price of the chain. This inflation to miners significantly impacts the chain's market cap more than it would with validators. This dynamic was a reason why some groups were happy to go short during last year's bull run. While the discussion touched upon the nuances of real versus nominal yields and the comparison of Ethereum to bonds and stocks, it's crucial to remember that different types of inflation aren't always comparable in crypto.
Transition from Proof of Work to Proof of Stake: Proof of stake is more efficient and can sustain high valuations, making it the future of the crypto industry. Bitcoin, currently the largest cryptocurrency, will likely be surpassed by proof of stake assets.
The transition from proof of work to proof of stake is essential for the scalability and sustainability of cryptocurrencies. Proof of work, while simpler and potentially less risky, cannot secure large market cap valuations due to the significant selling pressure from miners as the price of the proof of work asset scales. This issue is known as the "drag coefficient" and is a major limitation for chains looking to become global settlement layers. Proof of stake, on the other hand, is more efficient and can sustain high valuations. It is the future of the industry, and it is likely that a proof of stake asset will become the number one store value cryptocurrency, as long as there are no fundamental flaws found with the proof of stake consensus. Bitcoin, currently the largest cryptocurrency, will eventually be surpassed by multiple decentralized public chains as they adopt proof of stake. The conversation will continue to explore the timing and implications of this "flippening," as well as other remaining ethonomics. Juno, a crypto-friendly banking platform, allows users to send money from their checking account directly to Ethereum layer 2s, bypassing ACH wait times and gas fees. With $0 fees for buying and selling crypto and a metal Mastercard offering up to 5% cash back, Juno is making crypto more accessible and convenient for everyday use. New users can receive $10 cash back on their first crypto deposit and $100 when they set up a direct deposit.
Innovative solutions for Web 3 scalability and security: ZkSync uses zero-knowledge roll ups for Ethereum scalability and security, while Brave Wallet offers a secure, multi-chain crypto wallet without browser extensions.
ZkSync and the Brave Wallet are key players in the future of Web 3, offering innovative solutions to the challenges of blockchain scalability and security. ZkSync, an Ethereum layer 2 network, utilizes zero-knowledge roll ups to enable developers to build the next generation of Web 3 projects, while maintaining security and decentralization. The Brave Wallet, integrated into the Brave Browser, provides a secure, multi-chain crypto wallet without the need for browser extensions, enhancing user privacy and security. When it comes to store value assets, proof of stake consensus mechanisms offer advantages in terms of security and energy efficiency. Proof of stake requires less computational power than proof of work, making it more energy-efficient and reducing the need for massive mining operations. Moreover, proof of stake networks are more resilient to 51% attacks due to their distributed nature. However, the speed at which Ether might flip Bitcoin in terms of becoming the dominant store of value asset depends on various factors, including market adoption, regulatory environment, and technological advancements. Ultimately, both Ethereum and Bitcoin serve distinct purposes within the crypto ecosystem and may coexist as complementary store value assets.
Proof of Stake is more secure and efficient than Proof of Work: Proof of Stake requires less cost to secure a network and has a reflexive defense mechanism against attacks, while both systems have a vulnerability to price drops.
Proof of stake (PoS) is more efficient and harder to attack compared to proof of work (PoW) systems in terms of securing a blockchain network. PoS requires a much lower cost to achieve the same level of security as PoW, as stakers only need to provide a small percentage of their stake to secure the network. Additionally, PoS has a reflexive defense mechanism against attacks, as the finite number of tokens makes it increasingly difficult and expensive for an attacker to acquire a majority stake. However, both PoW and PoS have a fundamental problem: the price or security of the network is directly tied to the price of the asset. A decrease in the price of the asset can lead to a negative feedback loop, decreasing the security of the network and potentially causing further price drops. PoS has a defense mechanism against this, as the finite circulating supply makes it harder for an attacker to acquire a majority stake even if the price drops. PoW, on the other hand, does not have this defense mechanism, making it more vulnerable to this negative feedback loop. Ultimately, the choice between PoW and PoS depends on various factors, including the specific use case, the cost of security, and the potential vulnerabilities to attacks.
Ethereum's sustainable fees make it a better store of value than Bitcoin: Ethereum's larger fee pool ensures long-term security, making it a more attractive store of value than Bitcoin, which lacks a fee mechanism for security and is vulnerable to negative feedback loops.
Ethereum's ability to generate sustainable fees for long-term security makes it a better suited asset for a store of value compared to Bitcoin. The speaker argues that Bitcoin's lack of a fee mechanism for security makes it unsustainable and vulnerable to negative feedback loops. Ethereum, on the other hand, has a larger fee pool, ensuring long-term security and confidence. However, Ethereum currently lags behind Bitcoin in terms of credible neutrality due to its reliance on a developer team. But, the speaker believes Ethereum will eventually achieve credible neutrality and surpass Bitcoin in all aspects of being a store of value. The merge is seen as a significant step towards this goal, as it will shift the dynamics of the markets, making Ethereum more attractive to buyers and sellers over time, potentially leading to a flippening.
Different Views on Ethereum's Timeline to Surpass Bitcoin: Hal believes Ethereum could surpass Bitcoin in market cap within 4 years, while Ryan is less certain and thinks it may take longer. Both agree on the significance of the Ethereum merge and suggest different investment strategies.
Both Ryan and Hal are bullish on Ethereum's future, but they have different views on the timeline for Ethereum to surpass Bitcoin in market capitalization. Hal believes it could happen within the next 4 years, while Ryan is less certain and thinks it may take longer due to the historical inefficiencies in the crypto market and potential macroeconomic headwinds. They both agree that the merge, which will transition Ethereum from proof of work to proof of stake, is a significant event that will contribute to Ethereum's growth. However, they suggest different strategies for investors, with Hal advocating for a buy-and-hold approach and Ryan acknowledging the potential for volatility and shorter-term trading opportunities. Ultimately, they both remain confident in Ethereum's long-term potential.
Hal's Ethereum Merge Outlook: Not Fully Priced In Yet: Hal anticipates Ethereum prices to reach 10k to 25k in the middle of the decade and even considers the possibility of triple-digit ETH, but believes the merge has not been fully priced in yet, emphasizing the importance of risk management for investment funds.
The speaker, Hal, believes that the Ethereum merge, which is expected to bring significant changes to the Ethereum network, has not been fully priced in yet. Hal has increased his Ether position through conservative leveraged buys and plans to wait a few quarters before getting in at leverage again. He anticipates Ethereum prices to reach 10k to 25k in the middle of the decade and even considers the possibility of triple-digit ETH. Hal holds his leverage positions for a long time and only lets them ride with a comfortable liquidation price. He currently holds large positions in ETH, ETH BTC, liquid staking derivatives, and long ETH call spreads. Hal and his investment fund were heavily deployed two months ago but have since reduced their position due to reduced alpha and the approaching merge. They currently hold a moderate position and plan to hold through the merge regardless of the outcome. Hal emphasizes the importance of risk management for investment funds. Overall, Hal's perspective is that the merge has not been fully priced in yet and that there is still potential for significant gains in Ethereum.
Excitement and anticipation for the Ethereum Merge: Subscribers of Bankless newsletter will receive valuable content on the Ethereum Merge tomorrow. The Merge is a significant event in crypto, comes with risks, but many are eager to be a part of the journey towards the next frontier in blockchain technology.
Key takeaway from this discussion on Bankless is the excitement and anticipation surrounding the Ethereum Merge. Hal's in-depth thesis on the topic, which includes graphs and analysis, will be released tomorrow in the Bankless newsletter. Subscribers will receive this valuable content in their inbox. For those who prefer listening and watching, it's recommended to also become readers and absorb information in different formats. The Merge is a significant event in the crypto world, and while it comes with risks, many are eager to be a part of the journey towards this next frontier in blockchain technology. As a reminder, none of this discussion should be taken as financial advice. Always make your own informed decisions. Hal and Ryan were guests on the show and shared their insights on the Merge. Be sure to check out the Bankless newsletter tomorrow to read Hal's thesis.