Former BitMEX CEO Arthur Hayes says Ethereum (ETH) is likely ready for a corrective move in the coming weeks, regardless of the outcome of its next update.
In a new blog post, Hayes argues that if The Merge is not successful, the leading smart contract platform could see a steep drop in price.
“If The Merge is unsuccessful, the dump will be quick and vicious given the high expectations of the market compared to objective reality….
There will be a negatively reflective relationship between the price and the amount of currency deflation. Or to put it another way, there will be a positive reflective relationship between the price and the amount of currency inflation. Therefore, in this scenario, I believe traders will either go short or choose not to own ETH.
There is a bottom to this relationship as the network is the longest operating decentralized network. ETH achieved a very large market cap without a merger narrative. The most popular DApps [decentralized applications] are built using Ethereum and Ethereum also owns the largest number of developers of any tier 1 chain. “
In this scenario, Hayes says he does not expect Ethereum to fall below the $ 800- $ 1,000 range.
ETH is trading at $ 1,847 at the time of writing. The second largest crypto asset by market cap has dropped nearly 3% in the past 24 hours.
The highly anticipated ETH 2.0 update, currently scheduled for September 15, will allow Ethereum’s core network to merge with its Beacon chain, which would transform ETH into a proof-of-stake system. Ethereum currently uses a proof-of-work protocol.
The merger aims to address network scalability issues by laying the groundwork for future upgrades, including sharding.
Conversely, Hayes says a successful upgrade will spur an ETH rally, although he acknowledges it may not be immediate.
“The structural reduction in inflation will only happen after the merger. I expect we will see it unfold in a similar way to Bitcoin halving, meaning we all know the dates they will occur, yet, Bitcoin always continues to grow after the halving.
That said, it is possible that the price of ETH will drop slightly at the beginning and immediately after the merge. Those who cut partially or completely initially would feel great about their decision. However, with the onset of deflation and due to the reflective relationship between a high and rising ETH price and grid usage, the price may continue to gradually rise. At that point, you should decide when to return to your seat ”.
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