Ethereum’s future may be in the balance, but there's a catch

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Ethereum’s future may be in the balance, but there's a catch

The merge came, saw and conquered. The mega-upgrade on the Ethereum went live on Sept. 15, moving it to a less energy-intensive proof of stake PoS system with hardly a hiccup.

Even though anticipation of the event had seen ether rise about 85% from its June doldrums, it has since sunk 19%, along with bitcoin and other risky assets due to investor angst over inflation and central-bank policy.

Many market players are not happy with the long-term prospects of Ethereum and its native criptocurrency.

We talked to central banks and sovereign wealth funds to help build their digital asset allocations. Markus Thielen, chief investment officer at IDEG Limited, said direct investment has been voted down due to energy concerns.

This last pillar of concern is solved by moving to PoS with the adoption of ether. Some investors are focused on the next event that could shake up prices.

The market participants expect the Shanghai upgrade in around six months, which is intended to reduce its high transaction costs.

It would allow validators to withdraw their staked coins, in exchange for a yield, to hold or sell their ether token on the blockchain.

There is a lot at stake: over $20 billion of ether deposits are currently locked up, according to Glassnode.

According to CoinMarketCap, the staked ether coin is seen as a bet on Ethereum's long-term success, as it can't be redeemed until Shanghai happens. It is trading at near parity with ether at 0.989 ether, indicating confidence in future upgrades.

The coin dropped as low as 0.92 in June.

There is a lot of upgrades planned forEthereum, which Co-founder Vitalik Buterin has nicknamed the surge verge purge and splurge. The primary focus of future upgrades is likely to be on the ability to process more transactions.

Because the Merge was delayed for several years, investors, traders, and end-users have a lot of trepidation around whenEthereum will scale, according to Alex Thorn, head of firmwide research at Galaxy Digital.

Paul Brody, global leader at EY, said thatEthereum's future needs to, and will, scale to hundreds of millions of transactions a day. The goal of the merger was to reduce Ethereum's energy usage, as cryptocurrencies come under fire for their massive carbon footprint. The developers claim that energy consumption was cut by 99.95%, which could tempt powerful institutional investors, who were previously constrained by environmental, social and governance ESG concerns.

Adam Struck, CEO of venture capital firm Struck Crypto, said that future upgrades and mergers also hurt the investment appeal of so-called ethereum killerblockchains like Solana and Polkadot.

Institutional investors aren't jumping in just yet, because of the fearsome macro environment that chills the waters of risk appetite.

The switch to PoS is expected to reduce the rate at which ether tokens are issued, possibly by up to 90%, which should drive up prices.

An annual yield of 4.1% for ether token to validate transactions could prove tempting for investors.

Many purists point out that it movesEthereum away from a purely decentralized model as the biggest validators could exercise greater influence over the blockchain, while the proof-of- stake method allows for these lucrative yields.

The Merge moment is something that the world ofEthereum might be advised of for the time being.

There's going to be a lot of volatility in the days to come, according to analysts at Kaiko Research. The community can take a well-earned victory lap.