ESG v. Stolen BTC: The Eth Merge, the Mt. Gox Settlement and… the Flippening?

ESG v. Stolen BTC: The Eth Merge, the Mt. Gox Settlement and… the Flippening?

Is EthereumJesus.eth prescient? Since the lows of June 18th, crypto markets have enjoyed a solid bounce. The total crypto industry market cap is up nearly 40%; Bitcoin has climbed 23%. As encouraging as these bounces have been, Ethereum’s headline-grabbing development and eye-popping price action have stolen the show. Ethereum’s price has more than doubled recently. This is thanks to news of “The merge,” aka Eth 2.0’s move to a 79% less energy-dependent PoS consensus mechanism. The gap between Ethereum’s market cap and Bitcoin’s cap has closed to a relatively lean $215M. The “flippening,” or the moment where Ethereum’s market cap surpasses Bitcoin’s, is tantalizingly close. Now there’s some reason to think that gap could shrink or even disappear in the next couple weeks!

The two stories that could usher in the flippening are the aforementioned merge and the settlement of 2014’s Mt. Gox hack. After years of controversy, broken promises and waiting, victims of Mt. Gox’s Bitcoin hack will get their final settlement. Around 137,000 Bitcoin are set to be returned to their previous owners. The settlement could happen as soon as this month—owners also have the option of receiving the cash equivalent of their BTC balance. This means that there’s the threat of around $3.2B worth of Bitcoin being sold soon. Selling pressure will undoubtedly undo at least some of BTC’s recent gains.

The other side of the coin flippening is Ethereum delighting investors by going green and becoming deflationary. After The Merge, Ethereum projects to use 99% less energy. Block rewards (the payment that is given to those who secure the network) will also be greatly reduced. This reduction, combined with the burning of Eth gas fees via EIP-1559, will likely make Ethereum deflationary according to CitiBank

Deflation and Environmentalism are a strong one-two punch for today’s investors. Inflation is obviously grabbing all the headlines recently. Less obvious is that ESG-friendly investment is one of the hottest trends in global markets. According to the analysis of Factset, ESG investments have grown to over $35T in managed assets. Fully 33% of all managed assets in the US are classified as sustainable investments. These facts should buoy Ethereum’s narrative and gain it a fair share of new investors.

So will the combined effects of the Gox Settlement and Eth’s merge really bring about the flippening? Maybe. As with so many things in crypto and investing, one must be wary of buying the rumor and selling the news. In the grand scheme of things, $3.2B of Bitcoin sales is not enough to bring prices dramatically down. However, the rumor of a big sell-off is much more likely to hurt BTC’s price. For Ethereum, the rumor of a new and improved Eth protocol has already contributed to its massive July gains. Selling the news of the official merge (on September 15th) seems like the kind of move that professional traders would make to turn retail investors into exit liquidity. Lastly, there could be a snafu with the final steps of the Merge. Any technical issues with Eth 2.0 will lead to FUD and an Eth selloff. In that case, the flippening will remain an elusive theoretical possibility. As always with the crypto space, look towards the bright future ahead: there are no guarantees in the short term.

Writer and Redlion's editor-in-chief. Musician, 🥁 streamed over 100,000,000 times playing for Caught A Ghost, Magic Bronson and more. 2017 Experian hack victim... made the benefits of web3 easy to understand. Listening is his superpower.

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