Bankless

Share this post
5 Reasons The Merge is Bullish [LITE]
newsletter.banklesshq.com

5 Reasons The Merge is Bullish [LITE]

Why Ethereum's PoS transition is the biggest upgrade in crypto's history.

Lucas Campbell
Apr 11
11
Share this post
5 Reasons The Merge is Bullish [LITE]
newsletter.banklesshq.com

Access weekly Market Monday reports, token ratings, early podcasts, airdrop guides & more!


Dear Bankless Nation,

We’ve been talking about this a lot lately but…

The Merge is coming, and it’s massively bullish for ETH. 

Before we get into why let’s be clear that The Merge is no longer theoretical. It’s not vaporware, despite what the critics want to believe.

Testing has been happening for months now. And this weekend, client teams hit another milestone as they completed another test run of the real thing.

And guess what?

Everything went smoothly. 

Twitter avatar for @terencechainterence.eth @terencechain
Mainnet shadow fork was a success! The blocks are finalizing, and everything looks solid on the execution clients. Congrats to all the hard-working teams! 🎉
Image

April 11th 2022

60 Retweets306 Likes

It’s only a matter of weeks before there’s an official date locked in.

Once this happens, the FOMO is going to kick in as fundamental catalysts with The Merge will drive a wave of new demand for ETH.

Let’s explain. 

Here are 5 reasons why The Merge is bullish for ETH.  

1. ETH’s Triple Halving

One of the main catalysts for ETH with The Merge is the 90% reduction in token issuance.

Ethereum’s transition to Proof of Stake (PoS) allows the network to substantially reduce its inflation rate on the back of the new consensus algorithm’s security efficiencies. Simply put, the network doesn’t need to issue nearly as much ETH to secure the network with PoS.

As a result, ETH’s inflation rate is set to drop by the equivalent of three Bitcoin halvings. This has been dubbed the “triple halving” by members of the Ethereum community. 

Twitter avatar for @SquishChaosSquish @SquishChaos
Ethereum, The Triple Halving My report on the investment case for $ETH is finally finished. It is 79 pages long, my pride and joy, the cumulative product of years of learning and a week of insane effort.

April 27th 2021

1,176 Retweets5,868 Likes

Bitcoiners are notorious for promoting the Bitcoin Halving as a bullish catalyst for the asset. This is true - it’s a narrative that has defined crypto. In fact, every time there’s been a BTC halving, the asset has hit a new ATH within months. 

How The Bitcoin Halving Impacts Bitcoin's Price | by Igor | Coinmonks |  Medium
Note - BTC hit a new high of $60K less than 12 months after the BTC halving in 2020. Image Source.

This is why you should be bullish on Ethereum’s triple halving. Ethereum will speedrun the last 12 years of Bitcoin issuance reduction in a single moment this summer.

As a result, ETH’s issuance will drop to <1% annually, making it the asset with the lowest issuance on the market and making Ethereum the first profitable blockchain in history.

If BTC halvings are any indicator of what can happen to market prices, the triple halving alone is enough to propel ETH to new all-time highs. 

But that’s just one part. 

2. Ethereum becomes environmentally friendly  

With the transition to PoS, Ethereum eliminates virtually all of its energy consumption - about 99.95% to be exact.

Source

This is a massive narrative win for the network as environmental concerns with Proof-of-Work (PoW) are one of the biggest detriments to crypto’s mainstream adoption. 

On the surface, PoW is too energy-intensive for an increasingly environmentally-conscious world. But PoS doesn’t consume any more energy than running a laptop. 

Eliminating environmental concerns will be a key catalyst in winning over institutions and the public. For reference, ESG mandates can act as a significant barrier for large-scale investors looking to allocate capital towards crypto. 

With PoS, institutions have the ESG stamp of approval - opening the flood gates for new money to come into the asset.

Also, no more ridiculous claims that NFTs are killing the environment. LFG.

3. ETH Staking APY Increases

With The Merge, transaction fees will be directed away from hardware miners and towards ETH stakers—driving up the staking APY from 4% to upwards of 9-12%.

Twitter avatar for @panekkkkJacob Franek (is Hiring) @panekkkk
Coinbase expects ETH staking yields to rise to 9-12% APR post-merge.
Image

February 23rd 2022

108 Retweets816 Likes

The effects of this are fairly straightforward.

For one, hardware miners have recurring energy costs, creating a forcing function for them to sell their ETH rewards. With PoS, the sell pressure is substantially lower as there are minimal costs associated with running a validator.

And here’s something many people miss—ETH and its rewards won’t be withdrawable until the next fork many months after The Merge. This is a huge misconception as people think there will be 11M+ ETH that will be unlocked with The Merge. False! The ETH stays locked.

Learn more about The Merge with Ryan & David below!

It should be obvious that a higher staking yield is a major demand driver for ETH. In a world where real yields are negative and government bonds offer nothing, Ethereum is offering double-digit real yields. Investors can’t ignore it. 

ETH is on a path to becoming the internet bond. 

More people will flock to stake ETH following The Merge, locking up more of the ETH supply.

The increased staking yields and the inability to withdraw the rewards ultimately creates a black hole for ETH.

ETH goes in, nothing comes out.

4. ETH becomes deflationary 

The combination of the triple halving, the inability to withdraw staked ETH, and EIP-1559 creates an environment where ETH becomes deflationary.

You can simulate this right now on ultrasound.money

The network is on track to burn 3.1M ETH per year (remember that transaction fees won’t go down with The Merge!) and is projected to issue less than 1M ETH per year, depending on the amount of ETH staked. 

On a net issuance basis, there’s no more ETH hitting the market. Supply shock!

5. Gasoline on the Fire 

The rise of Alt-Layer 1s happened on a narrative of cheaper transaction fees and massive token incentive programs.

This forced Ethereum’s Layer 2 ecosystem to kick in gear, driving billions of dollars in opportunity costs to these scaling solutions with value on L2’s at all time highs. And here’s the good news—it’s all been organic growth. No token incentive.

None of the “Big 4” Layer 2s—Arbitrum, Optimism, StarkNet, and zkSync—have launched a token yet.

So what happens when Ethereum’s scalability solutions fight back with the exact same playbook? 

What happens if they launch 9-figure incentive programs that rival Alt-L1s?

They’ll siphon away demand.

Layer 2s are primed and ready to launch their native tokens. They’ve been fine-tuning the technology for the better part of a year. They’ve found a product-market fit with a bustling application layer. They all have investors with a cap table who will want liquidity.

They’re ready for a growth steroid.

The launch of L2 native tokens will fuel a rocketship of activity as users and investors look to scoop up ownership in these ecosystems, generating more transaction revenue for Ethereum.

This in turn will drive up the staking APY and amount of ETH burned. 

Higher yields, higher deflation. Layer 2s are good for ETH.

The perfect storm is brewing. 

Don’t sleep.

- Lucas


🙏 Sponsor: Polygon Studios—Fostering culture across Gaming, NFTs, and the Metaverse✨


🎙️ NEW PODCAST EPISODE

🎙️ Listen to podcast episode | iTunes | Spotify | YouTube | RSS Feed


MARKET MONDAY:

Scan this section and dig into anything interesting

Market Numbers 📊

  • BED tumbles -15% to $108 from $127 last Monday

  • GMI falls -14% to $59 from $69 last Monday

  • DEX volume stalls +0% at $17B from $17B since last Monday

  • DeFi TVL drops again -6% to $77B from $82B last Monday

  • L2 TVL dips -8% to $6.7B from $7.3B last Monday

  • BTC funding rate plummets to 0.89% from 3.11% (Bitmex) last Monday

  • ETH funding rate falls slightly to 5.8% from 7% (Bitmex) last Monday

Market Opportunities 💰

https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fce82317a-ad41-42f6-9259-7440c972d9bf_756x164.png

Yield Opportunities 🌾

https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fce82317a-ad41-42f6-9259-7440c972d9bf_756x164.png

What’s Hot 🔥

  • Madeira to accept Bitcoin as legal tender

  • Uniswap announces new investment arm: Labs Ventures

  • Robinhood releases new crypto wallet (with limited functions) to 2M users

  • U.K. Finance Minister Rishi Sunak announced the launch of a “Royal Mint NFT” to signal its crypto-friendliness

  • Paradigm research proposes a Dutch Action mechanism for fairer NFT trading

  • Bitcoin Lightning Labs raises $70M for new Taro protocol with stablecoin transaction capabilities

  • Binance.US raises $200M+ in seed round funding

  • Crypto-friendly senator Pat Toomey releases new stablecoin regulation draft

  • Arrakis Finance launches as a new DAO with a liquidity provision product

  • Three Arrows Capital scoops another 31,345 ETH

  • Terra acquires $100M in AVAX to boost UST reserves

  • Frax Finance considering a large purchase of crypto to back FRAX

  • Gravity DEX is rebranding itself as Crescent and moving to a new chain

Money reads 📚

  • The DAO hostile takeovers are coming - Mike Alliegro

  • An overview of the Service DAOs landscape - Terry Chung

  • Types of rollups in Web3 - polynya

  • A compilation of 11 Twitter threads on how to make it in crypto - Route 2 Fl

  • A deepdive into token-based compensation for Web3 startups - Zackary Skelly

  • Scaling the Ethereum ecosystem - Fred Wilson

  • New ERC-4626 token standard for yield-bearing assets - Yearn Finance

  • The Q-Trap - Arthur Hayes


Trending Project: Ichi 📈

https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fce82317a-ad41-42f6-9259-7440c972d9bf_756x164.png

What We’re Buying 👀

https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fce82317a-ad41-42f6-9259-7440c972d9bf_756x164.png

Governance Alpha 🚨

https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fce82317a-ad41-42f6-9259-7440c972d9bf_756x164.png

Meme of the Week 😂

Never miss a day of level-ups, no matter what.

Twitter avatar for @BanklessHQBankless 🏴 @BanklessHQ
BREAKING: LFG adds DAI to UST Reserves
Image

April 7th 2022

14 Retweets215 Likes

Job opportunities 🧑‍💼

  • Bankless is hiring an editor (come join us!)

  • Tally is hiring a Content Manager

  • Valist is hiring a Director of Developer Relations

  • Alluo is hiring a Solidity Architect

  • Mesha is hiring a Market Manager

  • Prometheus Research Labs is hiring a UX Designer

  • Degen Dogs Club is hiring a Community Manager

  • Messari is hiring a Software Engineer, Market Data

  • Messari is hiring a Blockchain Engineer, DAOs

  • Syndica is hiring a Senior Full Stack Engineer

  • Syndica is hiring a Senior Go/Rust Engineer

  • Syndica is hiring a Operations Manager

  • SmartDeFi is hiring a Senior Product Designer

  • Airdrop Labs is hiring a Sr. Software Engineer

  • Nori is hiring a Product Manager

Browse more roles (or add your own) at the Bankless Jobs Board


Action Steps

  • Execute any good market opportunities that you saw

  • Listen to How to be early | Olaf Carlson-Wee


🙏 Thanks to our sponsor

POLYGON STUDIOS

Polygon Studios is on a mission to help build digital culture, play-to-earn gaming, NFTs, and the Metaverse ecosystem on Polygon. Some of the key projects supported by Polygon Studios include The Sandbox, Skyweaver, Big Time, Crypto Unicorns, and Decentraland—among others. Polygon Studios also helps fundraising & onboarding. Check it out here.

Stay updated on the latest amazing gaming, NFT, and metaverse projects:

👉 Join the Polygon Studios Discord

👉 Follow Polygon Studios on Twitter


Want to get featured on Bankless? Send your article to submissions@banklesshq.com

Write for Bankless


Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.


Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.

Share this post
5 Reasons The Merge is Bullish [LITE]
newsletter.banklesshq.com
TopNewCommunity

No posts

Ready for more?

© 2022 Bankless, LLC.
Privacy ∙ Terms ∙ Collection notice
Publish on Substack Get the app
Substack is the home for great writing