Arthur Hayes, former CEO and co-founder of BitMEX has stated in a recent blog post that he expects the price of ETH to rise if the forthcoming merge is successful.
The Ethereum Blockchain currently runs the Proof of Work (PoW) consensus model which is pretty much energy consuming, less decentralized (considering the ease of the majority participating in mining and securing the Blockchain), and less secured relative to the Proof of Stake (PoS) consensus model.
Read more about the difference between PoS and PoW.
The Ethereum Blockchain created a testnet called Beacon chain to experiment with the PoS model and so far, it has been successful. Although, the mainnet still runs PoW in the execution layer; by September of 2022, this execution layer will be swapped with the Beacon chain which runs PoS. This swapping process is known as the merge.
Why Ethereum could rally after the merge
Arthur Hayes in his blog post described the theory of reflexivity by George Soros and related it to the recent happenings in the Ethereum space.
What is the theory of reflexivity?
The theory of reflexivity was stated by George Soros. The theory isn’t about money but about the relationship between thinking and reality. The theory of reflexivity can only be applied in a situation that involves thinking participants (basically any situation that involves people having a perception of the outcome).
In the theory of reflexivity, “the participants’ views influence the course of events and the course of events influences the participants’ views. The influence is continuous and circular; that is what turns it into a feedback loop.”
In essence, the market’s participants play a major role in bringing about the outcome that they speculate consciously or unconsciously.
The theory of reflexivity and the merge
Historically, following every Bitcoin halving, there has been an upward run in the price of Bitcoin. Relating this to Ethereum and considering the fact that Ethereum is cutting down 90% of its supply issuance rate used to pay miners compared to the 50% done by Bitcoin, it is a general expectation by the market participants that the market react in a similar manner. Arthur even added that this upward movement will likely continue and the peak will be “when all of humanity has an Ethereum wallet address”.
Asides the reduction of the issuance rate used to pay miners, the gas fees used to pay those fees will be burned for every block. This will further cut down the circulating supply of ETH.
Arthur also pointed out that there’s a possibility that the merge is unsuccessful which will likely result in a downturn in the price of Ethereum. However, he still maintained his bullishness pointing out that the Ethereum Blockchain is the longest operating decentralized network and also houses the biggest dApps in crypto.
He doesn’t believe think the price of ETH would go below the $800 – $1,000 range in the event of an unsuccessful merge because merge or no merge, Ethereum houses the best Blockchain developers in the space and is still the second largest crypto by market capitalization.
The views of Arthur Hayes referenced in this article are his personal opinions and should not be regarded as financial advice. Nevertheless, the general sentiments of the market participants are bullish and according to the theory of reflexivity, this perception will affect the playout of events.
