Ethereum’s price soared over the weekend after the network on Friday announced a tentative launch date for its highly anticipated software update, also known as “The Merge.” But only time will tell if ethereum’s price will continue to climb or fall back down to previous lows, according to experts.
Ether, the cryptocurrency native to Ethereum, rallied a whopping 40% over the last few days, quickly recovering from the sharp market decline brought on after news of higher-than-expected inflation data released last week. The second-largest cryptocurrency is currently trading above $1,500 — a significant rise from just a few days ago when it was trading closer to $1,000.
While ether’s current price is still down 75% from its November all time high, investors are closely watching every step leading up to the merge and in some cases taking advantage of the market downturn by buying the dip ahead of it. Many predict ethereum’s massive software update — slated for Sept. 19 — could significantly boost its value because it promises to make the network more efficient, faster, and cheaper to use.
Whether ethereum lives up to its promises remains to be seen, especially after several delays over the years, says Martin Hiesboeck, head of blockchain and crypto research at Uphold, a cryptocurrency exchange platform.
“While the price action of ethereum certainly gives hope for the overall market to maybe turn a corner in the next few weeks, the sudden jump is mostly motivated by hype and perhaps a lack of understanding of what ‘The Merge’ will actually do,” Hiesboeck says.
What Will the Ethereum Merge Mean for Your Crypto Investments?
There’s been a lot of buzz around ethereum’s merge in recent days, which in turn, has contributed to some bullish sentiment in the crypto market. A conference call between ethereum developers last week revealed that ethereum is slated to transition from proof-of-work to proof-of-stake on its main network in mid-September, though it could get delayed again.
“It has been announced in very similar wording six times before; ‘this is the one’ may just be hopium,” Hiesboeck says.
Ethereum has climbed by almost 40% since the announcement, and bitcoin has risen by over 10%, trading above $22,000. Smaller altcoins have followed their lead. There are several reasons why ethereum’s latest merge announcement is a big deal: ethereum is getting closer to transitioning to this new model, which will reduce its environmental impact and dramatically improve its transaction speed, among other improvements.
This, in turn, could drive ethereum’s price up significantly and create lucrative returns for investors who got in early. Some experts say 2022 will be a ‘make-or-break year’ for ethereum, predicting that its price could double or quadruple after the merge. Related altcoins could also see a price growth after the upgrade.
“The fact many big investors — from funds to private trusts —have mostly ethereum on the radar and are even barred from investing in other chains may very well drive prices up further in the near term,” says Hiesboeck.
Crypto expert and educator Wendy O says “things are looking pretty great” for ethereum when analyzing technical charts, but that it will only be able to reach $1,700 if it’s able to stay above $1,294 over the next few days or weeks.
Should You Invest in Ethereum?
With any crypto investment, financial advisors caution you to keep no more than 5% of your portfolio in cryptocurrency. You should also prioritize paying off debt, investing in a traditional retirement account, and building your emergency fund before investing in crypto, no matter how tempting the hype is. More than anything, experts say don’t invest any more than you’d be OK losing, since crypto is such a risky and speculative asset class.
If you’ve already prioritized other aspects of your finance and are willing to take on some risk, ethereum could be a solid bet. NextAdvisor’s Investability Score for ethereum is up nearly 1% over the last 24 hours, with a score of 71 out of 100. Along with bitcoin, experts consider ethereum among the safest crypto investments even if the merge doesn’t drive a return to the all-time high price it set in late 2021.