Crypto Crypto Crypto

Crypto Weekly: When to merge?

Summary:  The highly anticipated Ethereum merge has been delayed from this quarter to either Q3 or Q4. On Sunday, a decentralized application exploit worth $182mn stressed that 2022 is prone to be the year of protocol exploits, similar to 2021 being the year of non-fungible tokens (NFTs).


The Ethereum merge is delayed

The highly anticipated Ethereum merge previously scheduled for this summer has sort of been delayed, depending on who you ask. The merge will complete Ethereum’s consensus transition from proof-of-work to proof-of-stake, fundamentally reducing its energy consumption by 99.95%, reducing its yearly issuance from around 5.4mn to 0.5mn Ether, and making the cryptocurrency more resistant to attacks. The Ethereum Foundation never set an explicit date for the merge, but its website mentioned Q2 2022 for the merge until a week ago. As both April and May were highly unlikely, many rightfully anticipated that the merge would occur in June.

Source: Ethereum.org, April 13, 2022

However, on the 13th of April, Ethereum Foundation developer Tim Beiko wrote on Twitter that the merge will not happen in June, “but likely in the few months after”. In addition, Tim wrote that there is “No firm date yet, but we're definitely in the final chapter of PoW (proof-of-work) on Ethereum”. After the tweet by Beiko, some Ethereum core developers have stated that they are not aware of where the June target came from, while others argue that it is technically not a delay, since there was no firm launch date. While everyone anticipating the merge should have the deepest respect for Ethereum developers, it is clear that the June target relates to the Ethereum.org-website, handled by the Ethereum Foundation. For us not being deeply involved in the development of Ethereum, it is thus rightful to declare it as a delay. Ethereum.org now states that the merge is occurring in Q3 or Q4 this year. Based on the comment of Beiko, Q3 is presumably the most likely quarter of those two.

One more exploit for the books

Depending on one’s point of view in terms of crypto, 2021 is presumably the year of non-fungible tokens (NFTs), whereas 2022 is about to turn into the year of exploits of decentralized applications. The former does not need any introduction, whereas the latter might need one. In the last couple of years, the surge in popularity of decentralized applications has ultimately increased the number of applications and the value locked in each application. During the surge in popularity, the risks have increased proportionally, as there are more decentralized applications with a great amount of value locked but without a sufficient focus on security and hack mitigation. This has fundamentally made the industry a target for hackers. In 2021, there was a record-high number of exploits, but it seems that 2022 is on track to beat that. In January, Qubit Finance was exploited for $80mn, Wormhole was exploited for $326mn in February, and in late March, Ronin Network was hacked for over $600mn. On Sunday, there was one more for the books, as decentralized protocol Beanstalk Farms lost $182mn to an exploit, with the exploiter walking away with around $80mn.

To make matters worse, the FBI stated last week that the hack of Ronin Network is tied to North Korea-based Lazarus Group. Simultaneously, the Treasury Department sanctioned the address that received the stolen funds, which makes it more complicated to liquidate the crypto. The increasing cases of exploits and the North Korean regime tied to one of the largest hacks do genuinely not make crypto look good in the eyes of the general public and regulators. These exploits are a threat to the long-term sustainability of the industry. If the industry does not genuinely demonstrate that it is safe to interact with, either users or regulators will without a doubt put a halt to the industry sooner or later.
Bitcoin/USD - Source: Saxo Group
Ethereum/USD - Source: Saxo Group

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.