Investors should be careful around the Ethereum Merger

Investors should be careful around the Ethereum Merger
Investors should be careful around the Ethereum Merger

CEO of digital currency investment firm BKCM comments on the outlook for Ethereum ahead of the Merger.

In an episode of the show Fast Money CNBC contributor Brian Kelly mentioned that ETH investors may not enjoy as big profits as they expect due to ETH’s inflation mechanism.

I think it’s probably more of a “sell the news” thing, which maybe isn’t as intuitive because in crypto you usually want to buy the news. But everyone was buying Ethereum because they’re getting into this Merger and now you’re going to get what’s called yield.

Just so you know, it’s not really yield. You just get your rewards back for inflation, so it’s kind of offsetting currency inflation. It’s not actually yield.

Kelly expects that investor excitement ahead of the shift to a proof-of-stake (PoS) consensus mechanism will inevitably lead to a sell-off, but warns that there is also the possibility of confusion or outright failure, which could negatively impact the price of Ethereum and the the project itself.

There is probably a higher potential for an event related to the sale of the news surrounding the Merger.

A technical fault may also occur. Not only [това]but there are also many questions about what apps will do if Ethereum forks again.

A chain fork can occur and now have not one but two or three different Ethereums. So what will your DApp (decentralized application) do and what will it run on?

I think the Ethereum Merger has more risks than people realize.


READ MORE: An analyst shares what could portend a market reversal


Looking at economics more broadly, the analyst discusses the correlation of cryptocurrencies with the tech stocks sector, while highlighting the fundamental differences between Bitcoin and Ethereum.

She is very tall. Bitcoin’s correlation with the Nasdaq is somewhere around 60%. Ethereum’s correlation with the Nasdaq is somewhere around 70% for the last 30-day rolling period. Cryptocurrencies essentially act like ETFs [борсово търгуван фонд] with 2x leverage and triple Q.

I think there is some nuance here, as Bitcoin itself is not a technology stock. It is definitely an alternative currency. It is digital gold. You need it when your country destroys its currency, as many governments are doing today.

On the other hand, Ethereum can be thought of as a tech stock because it will disrupt a lot of what tech stocks are doing today.

To the extent that it’s taking daily active users away from places like Twitter, Facebook, and Google, I think there’s something to be said for Ethereum being a tech stock.

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