How Ethereum Could Surpass Bitcoin After The Merge

Key Insights:

• Ethereum issuance changes could remove any natural selling pressure after the Merge.
• The network will use 99% less energy which is good for policymakers and ESG-focused corporations.
• ETH prices are down 2.4% as a tumultuous week in macroeconomics begins.

Crypto markets are in retreat again during this Monday morning’s Asian trading session, but they have been rallying for the past fortnight, primarily driven by Ethereum.

The network will enter its final testing phase for the Merge on August 11, and the date for the mainnet launch is September 19.

The Merge will dock the current Ethereum proof-of-work chain with the new proof-of-stake chain, which will become the primary blockchain. The consensus mechanism for the network will transition to staking instead of mining.

There has been a lot of analysis and discussion recently on why this is such a bullish event for Ethereum. Some even believe it could eventually surpass or “flip” Bitcoin, becoming the industry’s largest digital asset.

Why The Merge is Such a Big Deal

On July 24, Ethereum analyst and researcher Vivek Raman tweeted why he thought ETH would flip BTC.

Why ETH will flip BTC:

There are 900 BTC mined per day. At current prices, that’s ~$20mm to miners daily

Let’s assume miners sell 90% to cover costs. That’s ~$18mm in sell pressure *every single day*

Meaning, without ~$18mm of new daily buy pressure, BTC price goes down

(1/8)

— VivekVentures.eth 🦇🔊🐼 (@VivekVentures) July 23, 2022

The first argument was based on supply as there are 900 BTC mined daily. This means that there is always some selling pressure on Bitcoin from miners taking profits. Without any new buying pressure, its price would fall, he added.

If the selling pressure disappears, prices should naturally drift higher, which will be the case for Ethereum after the Merge.

Ethereum is currently mined with 14,250 ETH issued per day; however after the Merge, issuance is likely to become deflationary due to the fee-burning mechanism introduced in August 2021. Over the past week, 13,249 ETH has been destroyed via this mechanism.

“This means that there could be *net daily buy pressure* on ETH (without a dollar of external capital entering),” he added.

“ETH will transform into an economically (and environmentally and game theoretically) sustainable asset – arguably more so than BTC.”

Another bullish factor he didn’t mention was that Ethereum’s energy consumption would be reduced by more than 99% after the Merge. This will make the network more acceptable to environmentalists, regulators, and policymakers, and more attractive to investors and corporations. Bitcoin will always be proof-of-work and will always demand more energy as adoption grows, and mining competition increases.

ETH Price Outlook

Ethereum prices have rallied 30% over the past fortnight, with the asset reaching a six-week high of $1,639 on Friday. It appears to have formed a range-bound channel over the past week; however, failing to break through resistance.

ETH is currently trading at $1,518, having lost 2.4% over the past 24 hours. The asset is still down 69% from its November 2021 all-time high, so the recent rally may have been short-lived.

This week’s market direction is likely to be driven by macroeconomic news from the United States as the Federal Reserve raises rates again and the GDP figures for the second quarter are announced.