Most Ethereum investors could expect lucrative tidings during the Merge day. Nevertheless, market players with these expectations should rethink the situation.
That’s because investors might have to withhold transactions on D-day. Though the assertion doesn’t welcome panic, enthusiasts should understand the associated risks.
According to Kyle Waters-led CoinMetrics report, the Ethereum Merge could attract negative implications.
The cryptocurrency research company stated that platform migration isn’t always seamless. Ethereum’s transition to PoS (Proof-of-Stake) from PoW (Proof-of-Work) could impact transactions.
Are There Associated Risks?
CoinMetrics revealed that the risk is beyond transactions, confirming a possible start from the Ethereum macroeconomic change.
While the Ethereum supply issuance has fluctuated, the EIP-1559 deployment in August last year neutralized previous changes. Therefore, Ethereum net issuance might drop to zero, leading to amplified transaction fees during the Merge.
Also, the report considered the daily Ethereum burn under the Proof-of-Work mechanism. CoinMetrics trusts the transition may see the daily 13,500 $ETH issue for burn plunging drastically. Also, the Proof-of-Stake might push Ethereum to deflationary trends (instead of PoW’s inflationary stance.
Considering the cautious approach, CoinMetrics told investors to suspend transactions as the mempool could endure challenges to tolerate the pressure.
Therefore, that might trigger price discrepancies or reversal in DEXes (decentralized exchanges) and Ethereum lending markets. Though the worries, the research company kept its outlook that Merge remained a necessary move for ETH.
Necessary Measure Probably
The report from CoinMetrics wasn’t the initial notification on the risks related to transactions.
The past few weeks had Binance announcing ETH deposit and withdrawal suspension during the migration period. Besides that, investors should also ponder other factors before the Merge happens.
Meanwhile, the Ethereum price didn’t appear to gear up for the awaited event. Coinmarketcap data shows the second-largest crypto dropped around 2.60% within 24 hours.
Decreased volumes followed the slide, with forecasts suggesting plunges towards $1,000. Ethereum investors might need to keep lower expectations as the Merge approaches.
What are your thoughts about the highly awaited ETH Merge? Feel free to share your opinions in the comment section below.