Investors are optimistic about Ethereum Merge Disinflation narrative

Investors are optimistic about Ethereum Merge Disinflation narrative

After many delays, Ethereum Merge to Proof-of-Stake (POS) remains at least one month and a testnet test, but investors are already sending ether to a bull run. According to the Kraken Kraken, the price for Ether rose by 59 %in July, more than triple the increase in Bitcoin by 17 %.

investors rely on the fact that a successful merger will greatly reduce the inflation rate of ether - and may even make the token deflationarily. Derivate dealers snap option contracts to benefit from a possible upward push of the Ether Prize.

Under the current ProOF-of-WORK system, miners are rewarded with two ETH when you are the first to solve a computing puzzle and create an Ethereum block.

Ethereum counters its token edition to Miner by pulling or burning a gas fee paid by buyers, which varies, pulls, pulls or burns depending on the network demand. More Ether is currently being created for miners than is removed by gas fees, which leads to inflation.

Proof-of-Stake lets Validators block or insert their ether, in exchange for a return on their tokens. According to a study by Runa Digital Assets, Ethereum pays 90 % less for the safety of the network by rewarding stakers compared to miners due to the difference in the required computer performance.

When the gas fee exceeds the return paid on stakers, more ether is burned than generated, which leads to deflation and upward pressure on the ETH.

The POS system "feels like a share buyback for stock investors," Max Williams, deputy portfolio manager at Runa, told Blockworks. "The network effectively buys shares [of ETH] and destroys them."

How strong will ether inflation go back?

The more ether is staket and the higher the demand for Ethereum blocks, the more deflationary the merge becomes.

Based on the current block demand, Research estimates of Blockworks The merger will not be deflationary, but greatly reduced inflation can still cause optimism among investors.

"Even if it were not deflationary, it would only be a much lower inflation rate," said Williams and named a disinflation of 90 % as a realistic result of the Ethereum fusion.

investors rely on ether by buying options and using ether.

options enable investors to complete risk -free bets on the price movement of a financial value within a defined time frame. The digital asset broker Bitooda reported that the current record volume of ETH option interest rates exceeds the BTC interest for the first time. The crypto trade company QCP Capital found in a telegram announcement that hedge funds were important option buyers.

the Merge "is so well telegrated that it makes the trade with options hypothetically a little easier because the greatest thing when trading with options is just the right timing," said Williams. "Dealers have the feeling that they have an advantage in terms of timing."

Williams also considers options to be an attractive game in view of the deteriorating macroeconomic conditions.

"People want a pure commitment to this event, and they don't want to have any commitment elsewhere, so use this commitment to the option markets," said Williams.

Ether staking has also been very popular lately. According to Kraken, the 13 million ETH used this week are an all -time high. Over 10 % of the circulating offer on ether are currently staked, compared to 7 % in February, Pro Cryptoquant.

Blockworks researcher Sam Martin Post-Merge-Staking returns at 5.89 %, based on data from August 4th.

All speculations about a positive Ethereum price movement depend on the fact that the merger-one of the most ambitious software upgrades in the history of crypto-runs smoothly. Therefore, the investors are closely observed the final fusion of Ethereum with the Goerli test network, which is expected on or nearby, 10. August . If this succeeds, the Mainset Merge should follow in mid -September.

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The contribution "Investors Bullish Over Ethereum Merge Disinflation Narrative" is not a financial advice.