The prior bullish outlook for the upgrade was mostly driven by the expectation that Ethereum will become less inflatable as a result of the event and strengthen its position as a store of value.
The next Ethereum (ETH) Merge update is anticipated to possibly cause a rise in the value of the cryptocurrency since it would enhance the blockchain following the Proof-of-Stake (PoS) changeover.
Despite the strong support for the upgrade, some stakeholders in the cryptocurrency market think there are some reasons for concern, particularly in light of the prospective entry of additional Ethereum tokens to the ecosystem.
This line suggests that one of the direct effects of the Merge is to cause a pump and dump scenario in Ethereum, especially with the distribution of tokens from the old Proof-of-Work (PoW) protocol, according to a well-known cryptocurrency market analyst who writes under the username Tradersweekly on TradingView.
The analyst predicts that a dump of newly produced tokens that will be sold alongside the Merge will take place. The analyst also stated that while the price of Ethereum would rise, it would only last a short time.
“Because of these ‘out of the thin air’ tokens, we think there might be an initial increase in the price of Ethereum (especially before the Merge). However, we expect a potential bounce to be temporary and newly created tokens to be dumped on the market together with Ethereum (after the Merge),” the analyst said.
The trader also pointed out that technical indicators that indicate very little liquidity in Ethereum support the pump and dump situation. The expert estimated a potential loss in this case of between $1,000 and $900.
There is no assurance that the Merge upgrade would spur an increase in Ethereum prices, according to Antoni Trenchev, the co-founder of the cryptocurrency loan marketplace Nexo. Trenchev asserts that the performance of Merge, the second-ranked cryptocurrency by market capitalization, will depend on its initial performance.
Notably, a number of industry analysts have continued to express caution on the upgrade’s overall effects. Ethereum has increased in value despite the downturn that the market has been experiencing; it is currently trading around $1,766, up about 2% in the last day.