Demand Destruction
Update on the Merge
Despite one of our potential catalysts for the year being struck down this week (the GBTC conversion to spot ETF), the prospects for a 2022 Ethereum remain intact. This weekend, ETH developers will attempt the second of three testnet merges on the path to mainnet Merge.
Testnet merges are essentially dress rehearsals for the main event – the Merge of the Ethereum mainnet. The first testnet merge featured a few speed bumps but the endeavor was considered a success by developers. To read more of our thoughts on how things like inflation rate and Beacon Chain unlocks, we refer you to our note from June 9th on the matter.
In terms of timing, the Gray Glacier hard fork that was completed this week delayed the difficulty bomb by 100 days, extending the acceptable timeline for the Merge to the beginning of Q4. The Ethereum Foundation website lists Q3/Q4 of this year as the estimated time of completion.
Below we can see that the options market is starting to speculate on the completion of the merge at the end of Q3, as signified in the spike in implied volatility for September options.
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