Cryptocurrencies are volatile assets by default. Their price can be influenced by anything, either for better or worse. Whether Ethereum 2.0 will positively affect the ETH price remains to be determined.
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Ethereum 2.0 Introduces Many Changes
Transitioning from the current iteration of Ethereum to Ethereum 2.0 is a very lengthy process. Upgrading an entire blockchain ecosystem requires time to make sure everything goes according to plan. In the case of this particular upgrade, there will be several Phases to accommodate this rollout. Every Phase will offer something extra that was previously not accessible.
The core changes for Ethereum 2.0 are introducing proof-of-stake, as well as chain sharding. Both of these developments will impact the network. Staking will replace Ethereum mining in about a year from today. Chain sharding will occur sooner and aims to address Ethereum’s scalability issues.
Ethereum 2.0 Is A Long-term Play
In Phase 0 – which is currently active – Ethereum enthusiasts can stake their ETH balance. To partake in this option, they need to contribute (multitudes of) 32 ETH to a smart contract. Additionally, these users have to run their own Ethereum node, which needs to remain online 24/7. Users cannot overlook this requirement, as it is a critical aspect of staking under the Ethereum 2.0 guidelines.
One downside to taking the current staking approach is how funds will be “frozen” for an extended period. More specifically, anyone who stakes ETH before Ethereum 2.0 Phase 1.5 will not be able to withdraw their stake nor access any staking rewards. All of that functionality will come into the picture during Phase 1.5.
Currently, there is no official activation date for that Phase. It can take a few months or more than a year. Such a degree of uncertainty may dissuade many enthusiasts from staking until the upgrade activates in full.
Will There Be A Price Impact?
The primary question people ask themselves is what Ethereum 2.0 will do for the Ether price. There is no doubt that for die-hard enthusiasts, ETH’s value will increase significantly over the coming months and years. Critics of the Ethereum 2.0 upgrade see things very differently. After all, there are still concerns over this upgrade going awry, eroding any confidence in this ecosystem altogether.
Why The Price Can Increase
Several factors can help the ETH price appreciate over the coming months.
- More people exploring the staking option means more ETH off the market. Currently, enthusiasts commit just over 1% of the circulating supply for staking purposes.
- Switching from proof-of-work to proof-of-stake will impact the emission schedule for ETH. This change will go into effect once Phase 1.5 launches and may not yield a short-term impact.
- A successful upgrade makes Ethereum more scalable and versatile, allowing for better DApps and DeFi projects.
- Demand for Ethereum’s technology may increase as the network becomes faster and cheaper to use.
Why The Price Can Remain Stagnant Or Decrease
The value of ETH may not necessarily see any positive changes due to Ethereum 2.0.
- The overall rollout timeline remains unclear, as developers do not communicate any dates at this time., making many users nervous regarding possible delays.
- The implementation of Ethereum 2.0 technology remains a potential point of failure. If one aspect of this phased rollout goes wrong, overall interest and trust in Ethereum may decrease significantly.
- Enthusiasts and speculators cannot ignore market volatility. The value of ETH goes up and down every day. Even Ethereum 2.0 may not change that aspect in any significant manner.
- Until Phase 1.5 triggers, mining Ethereum remains possible. As such, the circulating supply of ETH will keep increasing and may outpace the amount of ETH for staking purposes. A negative price impact is a likely outcome at that point.
No one has a crystal ball to accurately determine if the Ethereum price will go up or down in the future. Upgrading to Ethereum 2.0 offers a lot of improvements, assuming this process goes off without a hitch. It only takes one setback or delay to erode some of the confidence enthusiasts put into this project.
That said, being part of the cryptocurrency industry is often a long-term plan. As such, speculators and enthusiasts need to maintain a long-term mindset. Even then, it remains unclear if the Ethereum price will be higher or lower by the time Ethereum 2.0 activates in full. Anything can happen in this industry, either for better or worse.
You can now trade Ethereum with physical allocated Gold and Silver, with more pairs in the pipeline! This will let people hedge the risk of the ETH 2.0 roll out.