The ‘Merge’ is here — last chance to buy ether before makeover

It’s time for the “merge.”

The years-in-the-making, systemwide upgrade to the ethereum blockchain is set to roll out on Wednesday, marking one of the crypto sector’s most historic events to date. Leading up to the overhaul, investors have been jumping into ether, the native token to ethereum.

In the past three months, ether has jumped 32%, dramatically outperforming bitcoin, which has dropped 9%. While analysts say that anticipation around the merge has helped pump up the price, some experts see the real upside coming after the merge takes place.

“We believe post-merge the bull case for ethereum is going to be a lot stronger for a number of reasons,” said Katie Talati, head of research at asset management firm Arca. The main factor, she says, is that supply is going to come way down, creating scarcity.

The hallmark of ethereum’s big makeover is that it will take a lot less energy to verify transactions, which has long been a major problem for the crypto industry. The proof-of-stake model, which is replacing the proof-of-work model, requires validators on the network to put up their ether tokens, or “stake” them, essentially pulling them out of circulation for an extended period of time, in order to secure the network.

“For probably six to 12 months — there’s no defined guidance yet from developers on ethereum — you will not be able to withdraw your ethereum once you’ve staked it to validate the network,” Talati said.

Slashing energy consumption by more than 99% will also go a long way toward lowering the barrier to entry for institutional investors, who have been battling the optics of contributing to the climate crisis. The White House last week released a report warning that proof-of-work mining operations could get in the way of efforts to mitigate climate change.

Still, some skepticism has been creeping into the market.

Ether is down around 6% in the last 24 hours following the latest official read on inflation in the U.S., which punished risky assets on Tuesday and drove tech stocks to their worst day in over two years.

Whether to buy now or wait and see how the merge goes depends on an investor’s time horizon for holding the coins, said Jaydeep Korde, CEO of ethereum infrastructure builder Launchnodes. Korde tells CNBC that traders who plan to sit on their stake for the long term — in the range of two to three years — should be in good shape.

“If you’re looking in the shorter-term horizon in terms of trading, I think that it’s much more volatile,” Korde said. He cited global economic conditions, geopolitics and inflation as playing into the immediate risk.

“Ethereum will suffer the challenges of that volatility, like every other asset class,” Korde said.

With the upgrade, ethereum won’t become faster, cheaper or more scalable. One developer even told CNBC that if the user experience feels the same, that will be one sign that the merge was a total success.

The real investor draw is the slashing of energy usage,…