Ethereum won plaudits and the spotlight two weeks ago for smoothly pushing through its much-hyped Merge, a historic shift to a different “proof-of-stake” blockchain system designed to drastically reduce energy consumption – roughly 99% by some estimates.
Now, the second-biggest blockchain appears to be proving itself on another promise of the Merge: greater inflation resistance, a characteristic that’s usually more closely associated with Ethereum’s bigger and better-known rival, Bitcoin.
Charles Hoskinson, the often-outspoken creator of the Cardano blockchain, predicted “a rough time” for Ethereum in the months after its Merge due to the high inflation rates associated with proof-of-stake (PoS) systems.
Hoskinson commented during a recent video Q&A that he was asked to weigh in on Ethereum’s highly anticipated shift from proof-of-work (PoW) to PoS. In response, Hoskinson said that while he’s a big fan of Ethereum and thinks the project is “incredibly important,” he believes the community is in for a bit of a shock regarding post-Merge inflation.
“I think the Ethereum community is going to have a rough time over the next year or two as they transition from this proof-of-work system that has very low inflation to a proof-of-stake system where, depending on how you do your economics, could have inflation rates as high as 20%,” said Hoskinson.
Hoskinson isn’t alone in his assessment of Ethereum’s post-Merge prospects. Recently, analysts at Messari published a report in which they warned that “excessive” staking rewards could lead to “dramatic increases in ETH supply and downward pressure on prices.”
What do Technical Indicators suggest about ETH?
The 4-hour timeframe shows how ETH has respected the horizontal support and resistance levels. We can see that currently, ETH is at a pivotal point, and a break of $1,300 will give us a better idea of where ETH is heading in the short term.
Source: Tradingview
The Stochastic RSI looks like it will have a bearish crossover, suggesting ETH may head lower in the short term. The MACD also looks like it is about to have a bearish crossover, adding more weight to the case for ETH. Overall, the technical indicators suggest ETH may head lower in the short term, but we need to wait for confirmation before making decisions.
The fundamentals suggest that Ethereum is currently undervalued and has a lot of upside potential in the long term. The main reason for this is the increasing use cases for Ethereum’s smart contract platform, which is being used by many projects and businesses.
In addition, the recent successful launch of DeFi protocols on Ethereum’s mainnet is another positive development that should lead to increased demand for ETH.
Conclusion
In the short term, Ethereum’s price will likely be influenced by the overall cryptocurrency market. If Bitcoin and the broader market continue to trend higher, Ethereum should follow suit. However, Ethereum could also pull back in tandem if Bitcoin starts to correct lower.
