EricFIs the future OMNICHAIN? Cross-chain? Bridge? Multichain?
connects many chains seamlesslypeople will arbitrage between assets when the difference is significant enoughmultichain is cheaper and safer than conventional bridgingA Cross-chain is a bridge that allows different blockchains to communicate and transact. A blockchain bridge is a link through two separate blockchains.Cross-Chain? Blockchain Bridge?One can think of blockchains are like independent countries with their own rules and currency, and bridges as border crossings. Let’s compare block...
EricFWhat is a Metaverse?
each Metaverse has their own currencyeach Metaverse is different and has its own flavourwhich Metaverse will still be here five years later?There are more and more different Metaverses. Which one will be the most popular and used, no one knows at the moment, but I deem them as social platforms composed of land or world parcels that anyone can own, from everyday people to small businesses to big institutions.Why should you buy Metaverse Land?Owners of these small parcels (aka Metaverse Lands N...
EricFStartup: What's the Key to Success? How to be in the top 1%?
According to data from the U.S. Small Business Administration, about 20% of small businesses fail within the first year, and about 50% fail within the first five years. and according to a study by CB Insights, the failure rate for tech startups is around 90%.The startup, what do you look out for to succeed?Why do so few startups get external funding?How to improve the odds?How to be persistent even though I have not secured funding after trying for a long time?Starting a business is a journey...
https://twitter.com/EricCLFung
EricFIs the future OMNICHAIN? Cross-chain? Bridge? Multichain?
connects many chains seamlesslypeople will arbitrage between assets when the difference is significant enoughmultichain is cheaper and safer than conventional bridgingA Cross-chain is a bridge that allows different blockchains to communicate and transact. A blockchain bridge is a link through two separate blockchains.Cross-Chain? Blockchain Bridge?One can think of blockchains are like independent countries with their own rules and currency, and bridges as border crossings. Let’s compare block...
EricFWhat is a Metaverse?
each Metaverse has their own currencyeach Metaverse is different and has its own flavourwhich Metaverse will still be here five years later?There are more and more different Metaverses. Which one will be the most popular and used, no one knows at the moment, but I deem them as social platforms composed of land or world parcels that anyone can own, from everyday people to small businesses to big institutions.Why should you buy Metaverse Land?Owners of these small parcels (aka Metaverse Lands N...
EricFStartup: What's the Key to Success? How to be in the top 1%?
According to data from the U.S. Small Business Administration, about 20% of small businesses fail within the first year, and about 50% fail within the first five years. and according to a study by CB Insights, the failure rate for tech startups is around 90%.The startup, what do you look out for to succeed?Why do so few startups get external funding?How to improve the odds?How to be persistent even though I have not secured funding after trying for a long time?Starting a business is a journey...
https://twitter.com/EricCLFung
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Why? Overall Market Sentiment, recession incoming, and misconceptions of the Ethereum Merge may cause the price to drop off a cliff further.
With the recent catalysts, Terra Luna collapsed and celsius network liquidity issues. In addition, a few black swan events are cooking up right now, with Michael Saylor MicroStrategy's $20k BTC margin call, rumors on Three Arrow Capital facing possible insolvency, and Justin Sun's USDD stable coin risk of de-pegging. More and more FUD on USDT imenient collaspe. The Ethereum Ropsten testnet merged its proof-of-work execution layer with the Beacon Chain proof-of-stake consensus chain, but there were bugs there that needed to be fixed, hence the announcement that the Merge may be delayed.
Considering NFTs, trading volume is at an all-time low, with the US Federal Reserve's stance on decreasing the money supply (increasing interest rate) and with the world going into recession.
But I'm going to tell you my view from a retail investor perspective on the upcoming Ethereum Merge. The Ethereum Merge or ETH 2.0 s no longer bringing excitement. Instead, there are worries about how it will bring down the market even more.
In an interview with the Bankless podcast, leading Ethereum developer, Tim Beiko pushed the Merge back between August and November. "I'm just not as convinced that targeting more than a rough target, date-wise, is possible," he said. "However, I think for it not to happen this year, you'd need a catastrophic event, failure, or series of normal bugs." There's a lot going on with Ethereum, and if you're an investor, this is what you should know.
There are many misconceptions or misunderstandings of what the Merge will do. The Merge will not:
Reduce gas fees (reducing transaction costs) The Merge is an upgrade to the consensus layer. It swaps proof of work consensus for proof of stake consensus. This will reduce energy use, but this change won't affect gas costs. Cheaper execution layers already exist, though (Arbitrum, Optimism, etc.)
Allow you to withdraw your staked ETH
Be delivered on time
Previously known as Ethereum 2.0 or Serenity, the Merge upgrade is now on the cusp of making it to the launching on the mainnet The first step towards the Merge occurred in December 2020 with the launch of the Beacon chain, which has been operating independently of the Proof-of-Work (PoW in the following) Ethereum main chain. A one-way bridge accepts deposits so you can stake Ethereum's native currency, with just over 5.5 billion ETH staked on the Beacon chain across more than 340,000 validators. However, that staked ETH cannot be unstaked until after the full Ethereum Mainnet has been merged.
Reduce issuance rates of Ethereum tokens
Have zero emissions for nine months after the Merge, thus reducing sell pressure ( after that, then POS finally unlocks)
Have a triple halving, another saying that the Merge will have the same effect as 3 Bitcoin halving events. In other words, the reduction in Ethereum's supply upon a successful Merge will be like four years in Bitcoin time.
That's the good news.
Bad News
A horrible Terra Luna incident occurred in the crypto space. Lido Staked Ether (stETH), a token from the Lido protocol that is supposed to be 100% pegged by Ethereum, is losing its peg, and Celcius halted withdrawals.
Currently, Lido staked Ethereum is off its peg by 3-6%, meaning that sell pressure is growing. The message is crystal clear: Some whales and institutions have lost faith in the Merge, derisking themselves. So more and more retail investors are selling their crypto and NFTs.
Unlike the Terra Luna situation, staked Ethereum is guaranteed by smart contracts, meaning every stETH is redeemable 1:1 by ETH that is currently locked. This means that the Lido problem is not a backing issue, as in the Terra Luna situation, but a liquidity issue. Hence Celcuisus Network halted withdrawals.
This situation could get ugly because many whales, including the Celsius Network, got into leveraged positions to take advantage of stETH yields. Meaning that stETH being worth less than ETH can cause a short-term crisis where whales are forced to sell, further messing up the peg, and creating a downward spiral.
"If customers start withdrawing from Celsius, they will have to sell their stETH," Bitcoin investor and independent analyst Brad Mills explained. "Celsius has liabilities of 1 million ETH. So, 288k are inaccessible until [the] Merge, ~30K are lost, ~445k are stETH, and 268k are liquid. Could cause a run." Celsius may Go Under There are about $1.5 billion of positions staked in Ethereum in the Celsius Network. To remain solvent, they've already started borrowing stablecoins against their position. However, if the price of Ethereum continues to fall and Celsius is forced to sell, it could trigger a domino effect that could severely tank the market and make it into a death spiral.
What makes all of this more interesting is that Celsius put a target on their back when they led the charge to sell Terra Luna/UST a few weeks back. And that led to further collapse. So, ironically, this could be payback or karma.
Keep in mind all of this could be an internet conspiracy FUD; however, Celsius is in a very precarious position. All this halting of withdrawals and more internet FUD finding out in small print Celsius will not be responsible for any financial losses are worrying.
With that side, one staked ETH (stETH) is by smart contract; it is redeemable for one ETH, so the peg will most certainly be re-pegged in the future, but that doesn't mean there will be an enormous sell pressure on ETH in the short term, hence dropping the price further. So there is a big arbitrage opportunity here.
Positivity about the Merge There are three main reasons for Ethereum's shift to PoS: Energy efficiency Security Decentralization The triple halving narrative: following the Merge, the issuance of ETH will be reduced by 90%, equivalent to three block reward halvings (or 12 years) for Bitcoin. Since PoW will be deprecated, miners will no longer be natural sellers, which significantly reduces selling pressure for ETH.
As well as the reduction in issuance, the Merge will also transform ETH into a productive commodity (making it more similar to equity paying dividends) since holders can generate a return from staking. Furthermore, as more ETH is being staked, the available supply on the market will be reduced, which should, in theory, positively impact the price.
In conclusion, the Merge will be a considerable undertaking that significantly changes how Ethereum operates and will see ETH transition from a digital commodity to a yield-bearing asset, likely to spark renewed institutional interest in Ethereum. While there's a lot on the line, the potential benefits to scalability are expected to outweigh the risks involved.
As a result, the upgrade will not alleviate gas prices by itself, but the Merge does pave the way for Danksharding, which will address the scalability issue.
Ethereum is Bleeding More than ever, even with Utility and EIP1599 Burn
NFT's pricing is dropping, causing mass panic and more selling to NFTs, leading to more ETH being dumped onto the market. Increase supply, prices drop. DeFi and Ceci rewards are free-falling, and many hacks led to "trusting" the system. Ethereum's centralization concerns: As of September of last year, around 60% of Ethereum nodes were hosted in AWS or other cloud platforms as compared to Bitcoin's 40% And the Merge likely won't come in August. The Merge has been delayed for many months. (the missed deadline doesn't gel with many investors) And when the Merge does happen, the web3 community will realize the Merge would not fix the high gas fees.
Ultimately, Ethereum does have better long-term value and has much more utility, not including some silly JPEGs and NFT memberships, than Bitcoin.
When we get the Merge, Ethereum will be officially deflationary if there is a higher volume. As well as have a more sustainable consensus mechanism a la proof of stake. As a hobbyist miner, I like proof of work (POW), and it is an incentive to keep everything decentralized and secure. However, it is more challenging to purchase 32 ETH to become part of the proof of stake (POS) node than to leverage consumer hardware to become a POW validator. Hence, perhaps only big market players can become a POS node, making everything more centralized. Volatility and Crypto Blood Centralized exchanges, can freeze your withdrawals and swaps of a particular token, and this happened to me with UST (I was stuck on unstaking and selling of UST transactions for two days, and by that time, UST had fallen to 0.15 when I got out) Unrealistic returns like 20%+ fail during bear markets and should be avoided almost entirely.
The crypto market is very young, and still no regulations as of yet. With that said, Ethereum is still my favourite long-term investment, but there's no doubt there is blood in the waters right now. I still have loads of Ethereum in my portfolio, and my miners are still mining Ethereum as I speak. If it does go lower, I will just dollar cost average invest into Bitcoin and Ethereum. To be transparent, I hold more in percentage in NFTs than crypto. What can I say? I'm a degen at heart.
WAMGI
Thank you. I look forward to hearing your own insights and comments.
Cheers,
Eric F
If you want to get in touch about interesting NFT ideas or projects or want to hear about a specific topic, I'm @ericclfung on Twitter.
Thanks to @LiMeRiC & @Rocketman1988 & @CISBROS & @fichus0512 for reviewing this post.
https://twitter.com/EricCLFung/status/1537107851629703170?s=20&t=wmxkZIltbqV2e8qF49s6aQ
Why? Overall Market Sentiment, recession incoming, and misconceptions of the Ethereum Merge may cause the price to drop off a cliff further.
With the recent catalysts, Terra Luna collapsed and celsius network liquidity issues. In addition, a few black swan events are cooking up right now, with Michael Saylor MicroStrategy's $20k BTC margin call, rumors on Three Arrow Capital facing possible insolvency, and Justin Sun's USDD stable coin risk of de-pegging. More and more FUD on USDT imenient collaspe. The Ethereum Ropsten testnet merged its proof-of-work execution layer with the Beacon Chain proof-of-stake consensus chain, but there were bugs there that needed to be fixed, hence the announcement that the Merge may be delayed.
Considering NFTs, trading volume is at an all-time low, with the US Federal Reserve's stance on decreasing the money supply (increasing interest rate) and with the world going into recession.
But I'm going to tell you my view from a retail investor perspective on the upcoming Ethereum Merge. The Ethereum Merge or ETH 2.0 s no longer bringing excitement. Instead, there are worries about how it will bring down the market even more.
In an interview with the Bankless podcast, leading Ethereum developer, Tim Beiko pushed the Merge back between August and November. "I'm just not as convinced that targeting more than a rough target, date-wise, is possible," he said. "However, I think for it not to happen this year, you'd need a catastrophic event, failure, or series of normal bugs." There's a lot going on with Ethereum, and if you're an investor, this is what you should know.
There are many misconceptions or misunderstandings of what the Merge will do. The Merge will not:
Reduce gas fees (reducing transaction costs) The Merge is an upgrade to the consensus layer. It swaps proof of work consensus for proof of stake consensus. This will reduce energy use, but this change won't affect gas costs. Cheaper execution layers already exist, though (Arbitrum, Optimism, etc.)
Allow you to withdraw your staked ETH
Be delivered on time
Previously known as Ethereum 2.0 or Serenity, the Merge upgrade is now on the cusp of making it to the launching on the mainnet The first step towards the Merge occurred in December 2020 with the launch of the Beacon chain, which has been operating independently of the Proof-of-Work (PoW in the following) Ethereum main chain. A one-way bridge accepts deposits so you can stake Ethereum's native currency, with just over 5.5 billion ETH staked on the Beacon chain across more than 340,000 validators. However, that staked ETH cannot be unstaked until after the full Ethereum Mainnet has been merged.
Reduce issuance rates of Ethereum tokens
Have zero emissions for nine months after the Merge, thus reducing sell pressure ( after that, then POS finally unlocks)
Have a triple halving, another saying that the Merge will have the same effect as 3 Bitcoin halving events. In other words, the reduction in Ethereum's supply upon a successful Merge will be like four years in Bitcoin time.
That's the good news.
Bad News
A horrible Terra Luna incident occurred in the crypto space. Lido Staked Ether (stETH), a token from the Lido protocol that is supposed to be 100% pegged by Ethereum, is losing its peg, and Celcius halted withdrawals.
Currently, Lido staked Ethereum is off its peg by 3-6%, meaning that sell pressure is growing. The message is crystal clear: Some whales and institutions have lost faith in the Merge, derisking themselves. So more and more retail investors are selling their crypto and NFTs.
Unlike the Terra Luna situation, staked Ethereum is guaranteed by smart contracts, meaning every stETH is redeemable 1:1 by ETH that is currently locked. This means that the Lido problem is not a backing issue, as in the Terra Luna situation, but a liquidity issue. Hence Celcuisus Network halted withdrawals.
This situation could get ugly because many whales, including the Celsius Network, got into leveraged positions to take advantage of stETH yields. Meaning that stETH being worth less than ETH can cause a short-term crisis where whales are forced to sell, further messing up the peg, and creating a downward spiral.
"If customers start withdrawing from Celsius, they will have to sell their stETH," Bitcoin investor and independent analyst Brad Mills explained. "Celsius has liabilities of 1 million ETH. So, 288k are inaccessible until [the] Merge, ~30K are lost, ~445k are stETH, and 268k are liquid. Could cause a run." Celsius may Go Under There are about $1.5 billion of positions staked in Ethereum in the Celsius Network. To remain solvent, they've already started borrowing stablecoins against their position. However, if the price of Ethereum continues to fall and Celsius is forced to sell, it could trigger a domino effect that could severely tank the market and make it into a death spiral.
What makes all of this more interesting is that Celsius put a target on their back when they led the charge to sell Terra Luna/UST a few weeks back. And that led to further collapse. So, ironically, this could be payback or karma.
Keep in mind all of this could be an internet conspiracy FUD; however, Celsius is in a very precarious position. All this halting of withdrawals and more internet FUD finding out in small print Celsius will not be responsible for any financial losses are worrying.
With that side, one staked ETH (stETH) is by smart contract; it is redeemable for one ETH, so the peg will most certainly be re-pegged in the future, but that doesn't mean there will be an enormous sell pressure on ETH in the short term, hence dropping the price further. So there is a big arbitrage opportunity here.
Positivity about the Merge There are three main reasons for Ethereum's shift to PoS: Energy efficiency Security Decentralization The triple halving narrative: following the Merge, the issuance of ETH will be reduced by 90%, equivalent to three block reward halvings (or 12 years) for Bitcoin. Since PoW will be deprecated, miners will no longer be natural sellers, which significantly reduces selling pressure for ETH.
As well as the reduction in issuance, the Merge will also transform ETH into a productive commodity (making it more similar to equity paying dividends) since holders can generate a return from staking. Furthermore, as more ETH is being staked, the available supply on the market will be reduced, which should, in theory, positively impact the price.
In conclusion, the Merge will be a considerable undertaking that significantly changes how Ethereum operates and will see ETH transition from a digital commodity to a yield-bearing asset, likely to spark renewed institutional interest in Ethereum. While there's a lot on the line, the potential benefits to scalability are expected to outweigh the risks involved.
As a result, the upgrade will not alleviate gas prices by itself, but the Merge does pave the way for Danksharding, which will address the scalability issue.
Ethereum is Bleeding More than ever, even with Utility and EIP1599 Burn
NFT's pricing is dropping, causing mass panic and more selling to NFTs, leading to more ETH being dumped onto the market. Increase supply, prices drop. DeFi and Ceci rewards are free-falling, and many hacks led to "trusting" the system. Ethereum's centralization concerns: As of September of last year, around 60% of Ethereum nodes were hosted in AWS or other cloud platforms as compared to Bitcoin's 40% And the Merge likely won't come in August. The Merge has been delayed for many months. (the missed deadline doesn't gel with many investors) And when the Merge does happen, the web3 community will realize the Merge would not fix the high gas fees.
Ultimately, Ethereum does have better long-term value and has much more utility, not including some silly JPEGs and NFT memberships, than Bitcoin.
When we get the Merge, Ethereum will be officially deflationary if there is a higher volume. As well as have a more sustainable consensus mechanism a la proof of stake. As a hobbyist miner, I like proof of work (POW), and it is an incentive to keep everything decentralized and secure. However, it is more challenging to purchase 32 ETH to become part of the proof of stake (POS) node than to leverage consumer hardware to become a POW validator. Hence, perhaps only big market players can become a POS node, making everything more centralized. Volatility and Crypto Blood Centralized exchanges, can freeze your withdrawals and swaps of a particular token, and this happened to me with UST (I was stuck on unstaking and selling of UST transactions for two days, and by that time, UST had fallen to 0.15 when I got out) Unrealistic returns like 20%+ fail during bear markets and should be avoided almost entirely.
The crypto market is very young, and still no regulations as of yet. With that said, Ethereum is still my favourite long-term investment, but there's no doubt there is blood in the waters right now. I still have loads of Ethereum in my portfolio, and my miners are still mining Ethereum as I speak. If it does go lower, I will just dollar cost average invest into Bitcoin and Ethereum. To be transparent, I hold more in percentage in NFTs than crypto. What can I say? I'm a degen at heart.
WAMGI
Thank you. I look forward to hearing your own insights and comments.
Cheers,
Eric F
If you want to get in touch about interesting NFT ideas or projects or want to hear about a specific topic, I'm @ericclfung on Twitter.
Thanks to @LiMeRiC & @Rocketman1988 & @CISBROS & @fichus0512 for reviewing this post.
https://twitter.com/EricCLFung/status/1537107851629703170?s=20&t=wmxkZIltbqV2e8qF49s6aQ
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