BitMEX Co-Founder: In ‘Short Term’ All That Matters Is Rate of $ETH Issuance per Block

On Friday (September 23), Arthur Hayes, co-founder and former CEO of BitMEX, spoke about how he expects Ethereum ($ETH) price to change over the next few months.

In a blog post published yesterday, Hayes said:

As I’ve said in various interviews, the only thing that I think matters in the short-term (i.e. next three to six months) is how ETH issuance per block falls under the new proof-of-stake model. In the few days after the merger, the rate of ETH issuance has dropped from +13,000 ETH per day to -100 ETH on average.

ETH price continues to be smoked due to deteriorating USD liquidity, but give time for changes in supply and demand dynamics to take hold. Check back in a few months and I suspect you’ll find that the dramatic drop in supply has created a strong and rising price floor.

I previously wrote that I bought $3,000 call options on ETH/USD in December 2022. I’m afraid I may not have enough time left to cash in on these options…

Is removing nearly $2 billion of selling pressure enough to more than double the price in just over three months? If my USD Liquidity Index goes higher, I might have a chance. But hope is not an investment strategy. I most likely overestimated how quickly the supply reduction would translate into higher ETH fiat prices.

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Compared to Bitcoin, I am confident that ETH will continue to outperform. The cleaner trade would have been to buy options on the ETH/BTC cross. But I already had that position in physical and I like trading so I went for it.

On September 15, the day Ethereum completed its merge upgrade, marking the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus, Silicon Valley-based venture capital firm Andreessen Horowitz (“a16z”) explained why “Ethereum is now a far superior blockchain than it was before.”

Founded in 2009 by Marc Andreessen and Ben Horowitz, Andreessen Horowitz is a venture capital firm dedicated to “backing bold entrepreneurs building the future through technology.” It claims that it is phase-agnostic and invests in “seed capital to venture into late-stage tech companies in bio + healthcare, consumer, crypto, corporate, fintech, gaming and companies building towards American momentum.” a16z has “$35 billion in assets under management across multiple funds.”

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In a blog post published on Merge Day, Ali Yaha, a General Partner at a16z, called the merger “an insane feat” as this upgrade “involved the hot-swapping of the most important component of the Ethereum architecture — its consensus mechanism — while it was ongoing*.” Yaha noted that “all of this happened while backing up millions of users with perfect uptime, thousands of decentralized applications (dapps), and hundreds of billions of dollars.”

Yaha then said that these are some of the key benefits of Ethereum’s move to PoS consensus:

  • After the merge, Ethereum is now more than 100 times more energy efficient than before. Participating in the consensus no longer consumes the massive amount of power that PoW consumes. After The Merge, ETH’s energy consumption will be comparable to web2’s data centers.
  • PoS has direct access to each validator’s “stake”, the in-game funds or skins that validators deposit to secure the network. This allows PoS incentives to be far more detailed, further increasing security.
  • … anyone with 32 ETH can now participate as a validator on Ethereum.
  • On a PoS blockchain, transactions that pass consensus are final… The finality of transactions on Ethereum will lay the foundation for future work that will explore Ethereum’s ability to scale (via “Layer 2” solutions like rollups), to connect with other blockchains (via cross-chain bridges) and create better abstractions for developers that are easier to use and justify.
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He also mentioned that the merger is “a big deal” that “brings us closer to a world that benefits from an efficient and secure layer for decentralized computation that can support the applications we all want to build.”

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