- Ethereum (ETH-USD) has moved back up from its lows of $2,199.92 on Jan. 24, up 41.8% to over $3,140 as of March 26. Yet, it’s still down 16.7% year-to-date.
- Ethereum is making progress to soon transition to a proof-of-stake transaction validation system, stopping ETH-USD mining.
- That will likely have a very positive effect on the long-term price of Ethereum.
Ethereum (ETH-USD) is getting close to the point in time when it will stop accepting proof-of-work (PoW) as the main validation system for transactions. That is when Ethereum will transition to a Proof-of-Stake (PoS) system as its mechanism to validate Ethereum transactions.
In fact, recently the Ethereum Foundation discussed this move in a recent blog post. The Foundation, which supports the development of the cryptocurrency, has had its developers successfully release “Kiln,” the latest merge testnet.
The website U.Today reported that the Foundation said that merge testing will continue with all hands on deck. If no critical issues are discovered, Kiln will be the last new public testnet to be launched.
The online site reported that if no critical issues are discovered, Kiln will be the last new public testnet to be launched.
Whales Keep Buying Ethereum
According to U.Today, which is quickly becoming authoritative on Ethereum matters, a number of “whales” keep acquiring more Ether tokens. For example, it referred to the analytics firm Santiment in a tweet about whales increasing their stakes in Ethereum.
“Ethereum’s top 10 whale addresses have accumulated 4.3% more of the total supply than they had one year ago today,” according to U.Today.
I suspect that the two developments probably coincide with each other. For example, the largest owners of Ethereum probably believe that once the crypto transitions to proof-of-stake, it will become popular.
For one, more funds that believe in green crypto developments will be attracted to ETH-USD once its PoS transition occurs. This is because PoS does not involve crypto mining and the extensive use of electricity to validate and “mine.” This is what is presently involved in Ether mining.
Institutions Will Buy Ether With the Transition
Certainly, this is what the writers at Fortune magazine believe. They recently wrote an article entitled, “Ethereum’s blockchain is nearing a huge turning point that could push Ether’s market value ahead of Bitcoin’s.” The magazine referred to the most recent Kiln test and said that it would “decide its future.”
The point is Ethereum is the leader in decentralized finance (DeFi) and non-fungible tokens (NFTs). Once it transitions, this proof-of-stake upgrade: “could dramatically enhance its valuation.”
Fortune bases this thesis on the theory that institutional investors will be more open to purchasing Ether tokens. This is because its electricity usage in validating transactions falls by 99%. That is what will happen with the transition to PoS from mining. It seems that this inherently makes the ETH-USD more attractive to these institutions.
Indeed there is evidence that once the PoS system goes into effect, Ethereum staking yields will be between 10% and 15%, according to Coindesk. That is much higher than institutions can make in the fixed income market.
However, it is still not clear how Fortune’s claim that Ethereum will overtake Bitcoin (BTC-USD) in valuation will actually occur.
What Investors Should Do With Ethereum
ETH tokens have already been rising in anticipation that the merge and transition to PoS will occur sometime in the middle of this year. The latest Kiln test seems to be going well and after that, there seems to be no major hurdle to completing the transition.
This means that now is a good point of entry for enterprising investors in crypto markets. Given that Ethereum is the second-largest cryptocurrency, once the merge happens its popularity could skyrocket.
As a result, expect to see ETH-USD start to move higher as we approach the point where the transition will occur. I suspect that Ethereum, as a result, will start to approach the price it had at the end of last year.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.