Bitmex co-founder and former CEO Arthur Hayes predicts Ethereum’s price could hit $5,000 if its migration to proof-of-stake proves successful and the Fed adopts a less hawkish monetary policy .
As The Merge of Ethereum approaches, many are wondering if this event will have a positive impact on the price of the asset despite the bearish backdrop this year. Especially since the cryptocurrency lost more than 45% of its value in 2022.
After having called Ethereum a “shitcoin” in the past, Arthur Hayes has turned his back on the point of making it his favorite project in the crypto sphere. The migration of cryptocurrency to the proof-of-stake mechanism (proof of stake) apparently seduced him to the point of asserting that Ether will overtake Bitcoin after the event.
The Merge will boost the price of Ethereum
Following this same optimism for the future of Ethereum, Arthur Hayes recently published a blog post in which he explains that if The Merge proves successful, it could push the price of ETH towards 5,000. $ at the end of the first quarter of 2023.
He nevertheless conditioned this forecast on the posture of the monetary policy of the American Federal Reserve (Fed). However, the expert believes that the central bank should switch to a rather relaxed policy in order to support economic growth and avoid recession.
Like other bullish forecasters for the price of ETH, the former CEO of Bitmex makes a strong argument: the deflation of the token. He points out that The Merge of Ethereum would be equivalent to a triple “Bitcoin halving” as long as it reduces the number of tokens issued to the market when new blocks are created.
He added that the demand for Ether tokens will continue to increase as validators (stakers) will receive a much higher APY before the switch to mainnet. Hayes claimed that before the migration, the annual return of an Ethereum token is between 2-4%. After the merger, this yield will rise to between 8 and 12%. This is why he estimates that the Ether issuance rate will drop by 90% after it moves to proof-of-stake.
What if the merger does not turn out to be a success?
In his lengthy pitch, Hayes presents 4 scenarios for the future price of Ethereum considering the evolution of the mainnet and the monetary policy posture of the US central bank.
The first is the ultra optimistic scenario, where The Merge will succeed and the Fed will adopt an easing monetary policy. Thus, the expert sets a target price around $5,000. He acknowledges that his forecast is not so ambitious compared to other experts who see Ethereum reaching the $10,000 mark after The Merge. He justified his prediction by stating:
“I think this is a conservative estimate, as structural changes in supply and demand dynamics will never be fully assessed in advance”
The second scenario takes into account a successful merger but this time with a Fed that will maintain its current monetary policy. For the expert, the price of ETH will still progress because it will reproduce the same performance as Bitcoin did after its halving in 2020. According to Hayes, the price of Ether should thus climb to $3,562 .
The third is that of the hypothesis of a merger that failed or was delayed, and a Fed that changes its monetary policy. In this case, the expert estimates that Ether will only move a few small percentage points. The last scenario is that of the failure of migration and the maintenance of the current monetary policy. For Hayes, such a scenario would see Ethereum’s price plunge to its lowest levels.
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