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What are the potential opportunities in the crypto market with the Ethereum merger imminent?

On July 15th, Ethereum core developer Tim Beiko said in a conference call that the implementation date of the merged upgrade of Ethereum’s consensus algorithm migration to PoS is expected to be September 19th, and the community has no objection to the timeline proposed.

Following the announcement, the narrative thread surrounding the Ethereum merger in the crypto market became clear:

The supply side of Ethereum has undergone major changes, reducing production by 90%, driving the revaluation of the price of Ethereum.
The status of Ethereum’s liquid staking protocol has been greatly improved.
Ethereum miners withdraw, and some computing power migrates to other networks.
L2 Summer。

ETH: Towards a ‘deflationary’ currency

According to the data of ultrasound.money, the current annual circulation of Ethereum is 5.5 M, and the annual burning volume through EIP1559 is 1.0 M. The actual annual inflation rate is 3.7%. After the merger of Ethereum, the annual circulation of Ethereum is 0.6 M, which is 90% lower than the current output. Assuming constant burn, the combined annual inflation rate is -0.3%.

https://ultrasound.money/

The production of Ethereum is decreasing, but the demand side is increasing day by day. From the earliest gas fee, it gradually expands to more and more usage scenarios such as DeFi, NFT, DAO, NFT, etc., which will bring a new round of price revaluation with high probability.

In addition, the narrative of ETH becoming a global digital bond is being embraced by more people. Bitmex CEO Arthur Hayes detailed the huge value of ETH as a perpetual bond and its potential to replace U.S. Treasury bonds in an April article ” Five Ducking Digits “.

According to ethereum researcher Justin Drake, stakers can expect an annualized rate of return of about 8-11.5% after the merger. Using 5-year, 10-year, 20-year and 30-year yields as a comparison, in extreme cases, even if Ethereum falls by more than 60%, it can still achieve a yield that exceeds that of the US 30-year Treasury bond after 30 years.

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