In this episode, Hayes discusses the upcoming Proof-of-Stake upgrade for Ethereum.
According to Arthur Hayes, making a profit on the Ethereum Merge trade is “a no-brainer.”
During an interview with Bankless on Wednesday, the co-founder of BitMEX discussed the forthcoming Proof-of-Stake upgrade for the number two blockchain, which has been given the name “the Merge.” He also confirmed that he held a large position in ETH as a result of a significant change that the update is expected to bring to the network.
Hayes stated that ETH’s post-Merge issuance cut could serve as a catalyst for upward price momentum, going so far as to argue that it was “more powerful” than the current macro environment. The current macro environment has seen crypto and other asset classes enter a slump that has lasted for several months due to the Federal Reserve hiking interest rates to curb inflation. Hayes stated that the issuance cut could serve as a catalyst for upward price momentum.
After the Merge, the expected daily emission rate for Ethereum will fall from approximately 13,000 ETH to 1,600 ETH. Prior to the Merge, this rate was around 1,600 ETH. Hayes is of the opinion that this significant reduction, along with the demand from the market to make use of Ethereum, ought to contribute to the price of ETH increasing in the future. Hayes brought up the fact that Ethereum is the primary hub for DeFi at the moment and that it is continuing to see usage despite the fact that ETH is now trading at depressed levels. He said, “Unless you’re telling me that DeFi usage falls off a cliff with issuance as well, then you’re saying that demand is greater than supply, and therefore the price has to rise in my opinion.” If you’re not telling me that, then you’re saying that demand is greater than supply, and therefore the price has to rise.
Ryan, the other half of the Bankless duo Hayes responded “yes” when Sean Adams questioned him whether he thought the trade was “a no-brainer” because of the impending structural transformation that Ethereum is going to go through. Hayes is widely considered as one of the top writers and traders in the cryptocurrency industry. This year, he has been known for his bullish thoughts on ETH, which caused the price of ETH to skyrocket. On multiple times, he has asserted in a blog post for Medium that he will make audacious price projections for the asset, and he has consistently suggested that the price may reach $10,000 in 2022. On Bankless, Hayes said that he had purchased ETH call options with a $3,000 strike price and stated that he believed $3,000 was a feasible aim for 2022. Hayes also stated that he believed the price would reach $3,000 within the next two years. “Everyone is buying and selling that strike… Let’s say $3,000 at some point later on in the year,” he suggested.
Will the Ship that Merges?
Hayes conceded that he believed it was acceptable to have reservations about the event, and that the market may still be doubtful that it would launch smoothly, despite the fact that the Merge is set to ship in a little less than a week from now. He stated, “I don’t think people believe the Merge is going to happen at this point,” implying that people do not believe that the Merge will take place. “If you’ve been here long enough, you’ve probably heard Vitalik [Buterin] talking about it for, I don’t know, five or six years.”
He went on to say that the Merge narrative would have probably been more convincing if it hadn’t been scheduled so soon after the liquidity crisis event that occurred in the cryptocurrency market just a few weeks earlier, during which several major players went out of business as a result of the fallout from Terra’s explosion in May. He stated, “Imagine the bullishness of the ordinary trader if they hadn’t just lost all their money to Terra and Three Arrows [Capital].” “Imagine the bullishness of the average trader if they hadn’t just lost all their money to Terra and Three Arrows [Capital].”
Hayes stated that the upgrade itself might be a “sell the news” event that results in a brief 20% price decrease after the fact. This is despite the fact that Hayes believes that the Merge will serve as a good driver for ETH. Having said that, he went on to say that the narrative that surrounds Ethereum will become more compelling in the event that the Merge is successful and supply begins to decrease. “That [Ethereum developers] will have proven that they can get a very tough technical thing done speaks volumes about the caliber of the team,” he said. “[Ethereum developers] will have demonstrated that they can get a very difficult technical thing done.”
According to the most recent projections, the Merge will touch down in the early morning of September 14. ETH has been on an upward trend in the run-up to this point, and it is currently trading at $1,632 (a 7.7% increase on the day) while resting at a 2022 high of 0.084 in comparison to Bitcoin. ETH is still an a ways off from Hayes’ target of $3,000 and is about 66.6% below its all-time high, even with the recent surge that it experienced.