EthereumETH

took one step closer to completing the most anticipated blockchain upgrade in history.

Catch up: What is the Ethereum merge, and why is it such a big deal?

Don’t blink, or you might miss out…

ICYMI: The merge upgrades the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS). This addresses environmental concerns and increases network speeds, a major issue with Ethereum.

• Many see this as a bullish signal for Ethereum’s price — as more tokens will be taken out (burned) from circulation.
• The upgrade is expected to reduce the network’s energy consumption by over 99%.

This week, Ethereum successfully completed a merge on its Ropsten test network — in a process similar to the one that’ll occur on the main network (CoinDesk).

The results: Nothing major went wrong, and “everything went as smooth as it could be,” per the co-founder of QuickNode (CNBC).

It’s a complex process, and two more public tests are expected before the final merge — slated for August or September.

Why isn’t the price moving?

After the testnet merge, Ethereum moved lower — “showing the lack of awareness of the implications a successful merge will have”, per Simon Furlong of Geode Finance (Blockworks).

But May was a lousy month for crypto — worse for Ethereum, which powers the decentralized finance (DeFi) ecosystem.

At the start of May, investor attitudes toward DeFi soured with the collapse of Terra Luna — previously one of the largest DeFi protocols.

• Since the start of May, Ethereum has been down ~37%, underperforming Bitcoin, which is down ~24%.
• The DeFi Pulse Index (DPI) — an index tracking major DeFi tokens on Ethereum — is down over 36%.

“Confidence in the crypto ecosystem and decentralized finance remains at historically low levels” — per Julius Baer analyst, Sipho Arntzen (FT).

Investors: Will fundamentals triumph?

Ethereum’s protocol earns fees on transactions through its network — which lets investors value it using traditional stock valuation methods (discounted cash flow).

• Earlier this year, Bloomberg’s intelligence team released a note pegging Ethereum’s value at $6,128 in the core scenario (Insider).
• Another model by Ryan Allis at Coinstack gave a more bullish target of $9,631.

We’ve fallen back to ETH levels seen last July, and with these targets, the upside ranges from 240-430%. But investors are still avoiding risky assets amid rising interest rates, and it’s difficult to see when the macroeconomic pain will stop.