3rd September 2022 > > The Merge.

tl;dr

Update on The Merge.

Market Snap

Market Wrap

Sadly, I must report a sub $20k price for BTC today, reflecting the all-pervasive strength of the dollar despite a 20bp inversion in 2s-10s for treasuries.

Curious Cryptos’ Commentary – Update on The Merge

No breaking news, but as one of the premier crypto events of 2022, with ramifications that will echo down through the ages (“Daddy - what did you do during The Merge?”), it is good to stay on top of developments.

The block that marks the end of Proof-of-Work (PoW) ETH and the start of Proof-of-Stake (PoS) ETH has been tentatively assigned (https://blog.ethereum.org/2022/08/12/finalized-no-36) with a target date of September 15th, 2022, less than a fortnight away.

Keen observers of the CCC will already have moved their ETH holdings off any centralised exchange (and that must only mean Coinbase or Binance – no need to own ETH on any Chinese controlled exchange with ZERO property rights) to their self-custody wallet, most likely MetaMask, preferably secured using Ledger Nano X.

The reason for doing so is two-fold.

Firstly, self-custody is the superior solution for most of your crypto holdings on so many levels even without reference to the “not your keys, not your crypto” mantra of old.

Secondly, the prospect of a hard fork following The Merge is still alive.

If you haven’t been paying attention to the CCC of late, then a quick recap of the hard fork will have to suffice.

The ETH we know and love today will continue to be known as ETH post The Merge, though for now we reference it as ETHPoS. Some miners have made the decision to continue with PoW, bringing a second version of ETH into existence currently referenced as ETHPoW.

Current market prices are $1,550 for ETH, $1,500 for ETHPoS, and $53 for ETHPoW, offering such marginal arbitrage opportunities that they are best ignored for now.

If the hard fork goes ahead, self-custodial owners of ETH will own both ETHPoS and ETHPoW post The Merge. Off-chain (i.e. held on centralised exchanges) owners of ETH will own ETHPoS post The Merge but may or may not own ETHPoW.

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The CCC never gives investment advice, but if you are interested, these are some of my thoughts about my own crypto portfolio.

The Merge – contrary to popular opinion espoused by everyone except me – is a sell the rumour, buy the fact event. Using Dollar Cost Averaging (DCA) sellers of ETH over the past month or so and continuing for the next two weeks, will probably have realised an above market exit price.

In the days, and weeks, just after The Merge, I believe we will see a sell-off as people begin to realise that The Merge is simply one of many steps towards realising the full potential of ETH. Using DCA to reinvest in ETH is likely to realise a greater holding of ETH for the same investment.

This is not set in stone of course, so simply doing nothing, and continuing to hold ETH for the long-term is a perfectly viable investment strategy.

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As for the hard fork, I will sell my ETHPoW several days after The Merge.

I do not believe it has a long-term future, and even if it does, it will underperform ETH over any reasonable timescale.

As for any NFTs (non-fungible tokens) you own on the Ethereum blockchain, well, the hard fork raises some very interesting questions and conundrums, to which we will return another day.