This week, there will be two important updates of the Ethereum network: Constantinople and St. Petersburg. Constantinople has to increase the platform’s effectiveness, postpone the difficulty bomb and reduce the unit reward from 3 to 2 ETH.St. Petersburg is designed to remove the previous EIP 1283 update from the Ethereum test networks. Two hard forks at once — it is quite a significant event for any cryptocurrency. In this article, we present several opinions that have emerged among crypto-experts about how the forks will affect this cryptocurrency.
Reducing the Number of Miners and Coins
For quite a long time in a crypto-community, disputes about the prospects of the hard fork Ethereum Constantinople, which, according to Vitalik Buterin, is a long-awaited and necessary upgrade of the network, have not abated.
A total of five infrastructure parameters will change, one of which – EIP 1234 – may have a significant impact on the cost of the Ethereum, since it reduces the remuneration for each extracted block in the network from 3 to 2 ETH. This is a forced measure, as it will allow noticeably, namely, almost twice, to reduce the creation of new coins and, accordingly, to reduce the very high inflationary ETH value from almost 8% to about 4,5%. Of course, such a change would entail a decrease in the number of miners extracting the Ethereum. Mining Ethereum during the time of current rate and is so unprofitable, and a reduction in remuneration will entail switching mining farms to mining other coins or turning them off altogether.
So after hard fork Constantinople, contrary to forecasts, the actual number of coins produced will be slightly over 3,5 per year, and inflation will be about 3,8%, which automatically has a positive effect on the rate of ETH (ETH / USD). And provided that the cryptocurrency market turns to growth, the first signs of which we are seeing now, we can expect a steady increase in the price of the coin.
Hard Fork Will Not Affect the Rate of Ethereum
In 2018, the rate of Ethereum fell abnormally strongly, and Ethereum lost second place in the cryptocurrency rating. However, analysts mostly associate this not with the fork, but with an abundance of unsuccessful ICO-projects. Recently, the rate of Ethereum has ceased to fall in relation to Bitcoin and even slightly increased. Altcoins are traditionally more volatile than Bitcoin.
If you look at the events of recent days, then on February 24, the rate of Bitcoin (EXANTE: Bitcoin) rose from $ 4,000 to $ 4,200, and the Ethereum — from $ 148 to $ 164. At the same time, on February 25, the Bitcoin exchange rate fell to $ 3,800 and Ethereum to $ 138. Now Ethereum costs 0,036 BTC, which is quite typical for this winter. Hard fork is unlikely to significantly affect the rate at the moment.
Ethereum Will Fall in Price
There is also an opinion that hard fork will cause a fall of Ethereum in price. There are classic (applicable speculative and situational) patterns and techniques of financial instruments trading. Buy the rumors, sell facts. Therefore, traders need to be ready to take profits. Another factor and argument in favor of a possible drop in quotations will be the overall negative situation on the blue cryptographic market with a sharp pullback of Bitcoin in price of recent days to levels below $ 4000. An even greater risk may be the disappointment with the new implementations: both possible failures of hard forks, and unjustifiably inflated expectations of their valuable content.
Some people are waiting for the price increase due to the transition of the project to the Proof-of-Stake and opportunities to increase scalability. Others point to the fact that the reward for the block has decreased to 2 ETH and that the fork has already been included in the cost of the token and, therefore, will not have a strong influence on the bidding process.
Other experts believe that we will see the synergy of the two options. In the long run, the fork is a truly positive fundamental point that can bring the price to level of $ 250 (September 2018 maximum). The POS algorithm will allow market participants, relatively speaking, to mine the Ethereum without buying a video card, but in the way of buying and holding the token, which will positively affect the price.
However, in the short term, ETH is much more likely to decrease amid the fork.
Firstly, on the eve of this event, the rate has grown significantly, which means that the price already contains information.
Secondly, and not least, Ethereum is beginning to experience increasing pressure from its main competitors, the EOS and Tron projects. The latter is also going to conduct hard fork in the coming days, which may coincide with the date of the ETH fork and unequivocally indicates the readiness of other projects to compete with Ethereum for demand from market participants.
And thirdly, in spite of the positive beginning of 2019, the global market continues to be feverish, and behind the attempts of steady growth, there is sharp and directed fall of prices.
In the absence of important shifts in the issues of regulation, custodial services and launching services for institutional investors, market participants have almost nothing to cling to, and trading takes place more in ranges. That is why the immediate goal of price movements for ETH is the level of $ 115, after reaching which the asset can be considered for long-term investments.