Coins & Money

Some Final Considerations Ahead of Ethereum’s Merge

The rapid rise of cryptocurrency and Bitcoin and anything digital was a wonder to watch and participate in up until November 2021. The first ten days of November had anyone and everyone who bought Bitcoin and most crypto-rivals as digital asset experts, gurus, wizards and so on. But after crossing the $68,000 mark on two days it has been a painful and bumpy ride since. Bitcoin’s attempts for a summer recovery rally have failed and Bitcoin was most recently back under $19,000 and Ether was recently trading near $1,550.

Now the crypto-bulls have many high hopes for “The Merge” that is supposed to occur on or around September 15, 2022. The problem that many crypto-HODLrs have in trying to interpret “The Merge” is that it may not mean anything that is easily visible. But to many, it is supposed to be a night and day difference.

Many crypto investors have taken profits and losses already. Many crypto investors have also held every little bit they could. And for what all of this really means, perhaps Barron’s recently said it the best — “If Bitcoin is crypto’s answer to gold, Ethereum is the closest thing it has to its own internet… Aside from Bitcoin, no other network is more critical to
crypto’s infrastructure or its future.”

The reality is that Bitcoin is the so-called gold standard in crypto. But any real world purchases in minting, crypto-apps, NFTs and so on are likely using the Ethereum network. It’s effectively the digital cash being used and Ethereum and other cryptocurrencies (or digital assets more appropriately) all have high hopes for augmented reality, virtual reality and the coming Metaverse (or Metaverses).

Collectors Dashboard treats all digital assets like Bitcoin, Ethereum, NFTs and so on as an alternative asset class. That doesn’t mean that all baseball card collectors and fine art buyers are unilaterally buying up digital apes, digital art (NFTs) and so on. But digital assets do still have their place within many portfolios nonetheless.

The Merge may or may not take place on this day. There are many things that can cause a delay to an overhaul of this scale. The shift to proof-of-stake will replace the proof-of-work. It means that there will be a cleaner authentication for crypto transactions and it means that the power consumption is supposed to go from intense to negligible.

There are some statistics we have taken from trusted sources that might help to better explain why all of this matters. It won’t be the equivalent to Skynet’s instant takeover and domination of humanity and it won’t be like the fixes to the Y2K bug from over 20 years ago. Here are some stats, with sources named:

  • ~$3 billion-plus in daily Ethereum transactions (Barron’s)
  • ~$60 billion in crypto assets on Ethereum’s blockchain via
    third-party apps (Barron’s)
  • ~$360 billion in Bitcoin and ~$188 billion in Ether, not counting derivatives (Yahoo! Finance)
  • ~Market cap of Coinbase Golbal, Inc. (NASDAQ: COIN) ~$17 billion (Yahoo! Finance)
  • ~Market cap of Robinhood Markets, Inc. (NASDAQ: HOOD) ~$8 billion (Yahoo! Finance)
  • ~Market cap of ProShares Bitcoin Strategy ETF (NYSEArca: BITO) ~$800 million (Yahoo! Finance)
  • Ethereum blocks issued once every 13-14 seconds under proof-of-work will be “issued in regular 12-second intervals” (Coinbase)
  • Merge is not guaranteed to boost the ETH price (Coinbase)
  • Proof-of-stake will slash Ethereum’s energy usage by ~99.95% (
  • It takes 32 ETH to become a validator or staker in Ethereum, or nearly $50K today (Coinbase)
  • Staked ether stays locked up with the network until around 6-12 months after the Merge (Coinbase)

The Federal Reserve issues its Economic Well-Being of U.S. Households report. The May 2022 report for 2021 included data and observations in “Conducting Financial Transactions Using Cryptocurrencies” as follows:

Cryptocurrencies are relatively new digital assets that may be held as an investment or used for conducting financial transactions. In 2021, most people using cryptocurrencies did so for investment purposes. In 2021, 12 percent of adults held or used cryptocurrencies in the prior year. Eleven percent of adults had held cryptocurrency as an investment, while a far smaller 2 percent of adults said that they used cryptocurrency to buy something or make a payment in the prior 12 months, and 1 percent used it to send money to friends or family.

Those who held cryptocurrency purely for investment purposes were disproportionately high-income, almost always had a traditional banking relationship, and typically had other retirement savings. Forty-six percent of those using cryptocurrencies only for investment had an income of $100,000 or more, while 29 percent had an income under $50,000. Additionally, 99 percent of those investing in cryptocurrency, but not using it for transactions, had a bank account, and 89 percent of nonretired cryptocurrency investors had at least some retirement savings.

Nearly 6 in 10 adults who used cryptocurrencies for transactions had an income of less than $50,000. A far lower 24 percent of transactional users had an income of more than $100,000.

Transactional cryptocurrency users also were less likely to have a bank account. Thirteen percent of those who used cryptocurrency for transactions lack a bank account, compared with 6 percent of adults who did not use cryptocurrency. Similarly, 27 percent of transactional cryptocurrency users did not have a credit card, exceeding the 17 percent of non-users without a credit card.

And for the Wall Street Journal quote that crypto-bulls and crypto-skeptics really need to pay attention to about the Merge… “If all goes well, it would create a more energy-efficient system. If it doesn’t, it could prompt a fresh selloff in crypto.”

With roughly one-week to go, Ether’s drop from its 2021 high has been about 68% versus a loss of about 72% for Bitcoin.