Ethereum (ETH) has long been the center of innovations for the crypto industry, especially for being one of the most reputed platforms in the world. In addition, the Blockchain is known to host most of the world’s Defi, GameFi, and NFT protocols, thanks to its flexible protocols.
All these factors have been responsible for directly/indirectly influencing the token’s movement, making it the second-largest token by market cap. However, what if we told you that the token is just in its infancy?
Now that the ETH 2.0 Merge is complete, it’s time for the token’s triple-halving to come into action. With its halving, ETH is expected to revise its price movements and reach a larger scale, possibly beating BTC to be the leading token by market capitalization.
But is it possible? More importantly, what is ‘triple halving?’ Continue reading as we explore the different aspects of the token’s new move and understand how high can Ethereum go. Let’s get started.
Halving: What The Concept Is About?
‘Halving’ is a concept more popular among Bitcoin investors and analysts. Bitcoin halving is more like an event (sometimes also known as ‘the Halvening’) when the community cuts the block rewards for mining Bitcoin tokens in half. This further denotes that the new coins issued will also be cut in half.
This Bitcoin-only practice allows the software to ensure that the token retains its monetary soundness in the future. The concept behind ‘halving’ is to reduce the inflation rate in the industry periodically. Interestingly, every time the token initiated such a proposition, the market witnessed a bullish run.
Now, moving back to our token of focus, ETH, let’s understand whether or not it has a ‘halving’ policy in place.
Does Ethereum Have a Halving?
Initially, the Ethereum community relied on a similar concept as the halving to increase the value of its tokens. However, following the ETH 2.0 update, the community has abandoned the PoW (proof-of-work) mining consensus to switch to a more reliable, energy-efficient PoS (proof-of-stake) consensus mechanism.
Interestingly, this update to ETH 2.0 adds a unique factor to the ‘halving’ process. So while the function might remain the same in terms of its output, there will be a few changes in how it proceeds, making it Ethereum ‘triple’ halving.
Besides, a change in approach only makes sense. Ethereum (ETH), as a token, is unique in comparison to Bitcoin. Both tokens have different fundamentals and support unique utility factors. Furthermore, the recent switch to PoW allows the community to reduce the total ETH supply (as discussed among the community members). Therefore, the name ‘triple halving’ instead of just ‘halving.’
To give you a fair idea, here’s an overview of the overall reduction in ETH block rewards since its inception:
- Genesis to 2017: Overall reward per block was 5 ETH tokens.
- 2017 to 2019: The total reward was reduced from 5 to 3 ETH tokens per block (via EIP-649 update).
- 2019 to now: The total reward was reduced from 3 to 2 ETH tokens per block (via EIP-1234).
At its earlier stage, the supply of ETH would increase by 4.3% per year (approx). One of the primary reasons behind the steep increase was incentivizing miners and securing the Blockchain, making it a costly move.
However, fast forward to September 2022, the onset of the ETH 2.0 Merge allowed Ethereum to transition to a validator-secured network from a miner-secured one.
This way, once the validators are selected, they will be allowed to be the exclusive creators of an ETH block. This way, by reducing the high cost of mining by ~99.95%, the ‘triple halving’ will directly influence reduced issuance.
How Triple Halving Will Work For Ethereum
As mentioned earlier, Bitcoin operates over a deflationary principle, occasionally reducing the overall tokens present in the market. This way, even though the token has a limited cap of 21 million, the demand continues to increase, creating a better market value for the project.
Similarly, triple halving too will make Ethereum a deflationary currency. As the name suggests, the process can be categorized into three different procedures, namely:
A. Reduced Issuance
Before the ETH Merge, miners would earn rewards for mining blocks of ETH over the Blockchain, following a similar model as Bitcoin. However, following the Merge and a switch to PoS consensus, the stakers (not miners) will be the validators of new blocks for the ETH Blockchain.
This way, the first half of the triple-halving concept will significantly reduce the rewards earned by the validators. While the reward ratio is still unannounced, Montana Wong, a renowned Blockchain engineer, tweets suggest that ETH’s annual issuance will drop to 0.4% from its pre-Merge state of 4.3%.
This 10x reduction in the issue of Ethereum tokens will increase the deflationary pressure by curtailing the overall supply. This way, the community will significantly reduce the price behind energy costs to secure the network.
B. Burning
The ‘second half’ of the deflationary strategy involves the burning process. This happens when ETH is sent to a wallet without any access key, making it a lost cause over the Blockchain.
Here, a specific amount of tokens (pre-decided by the community) are burnt. For instance, the community decided to burn over $6 billion worth of tokens in March before proceeding with the Merge. This allowed the mechanism to split miner rewards where while the miners were still collecting ETH in March, the payouts were split into basic fees and tips.
C. Staked Withdrawals
The third and final half of the deflationary design is related to the post-Merge validation mechanism, staking. As per the latest updates, ETH investors can now lock their tokens into the Blockchain network via validators, who will proceed with securing the Blockchain’s next Block.
Besides, stakers would also be rewarded for locking their ETH over a collective pool. However, the withdrawals will only be possible after six to 12 months following the Merge. Once the pool is matured, investors can withdraw their tokens in a queue format, ultimately preventing a massive wave of locked-up holdings from manipulating the market price.
All these three halves will help maintain the token’s price and supply over time. But while we’re positive about the correction in the token’s price, how high will Ethereum go? Let’s find out as we look into its possible price forecast in the next section.
How High Could ETH Go?
While the prospects for Ethereum are high after the Merge, the bearish market has influenced the token. By the end of January 2022, ETH was already 30% down from its previous all-time high. Fast forward to December 2022, and ETH has lost a considerable market value, reaching the $1,150 mark.
What’s Next For ETH?
Interestingly, even though 2022 has been a relatively downward trend for the ETH and almost all the large-cap tokens, the future post the triple halving seems bright.
Looking at the current market movements, the token is expected to enter a correction phase and eventually enter a long bullish run for 2023. Following this, with the Merge being a general concept among investors and traders, our Ethereum price forecast suggests the token to reach a market cap of $5.8 trillion by 2030.
When the token reaches its target, every coin will be priced around $170,000 – $180,000.
Invest Wisely!
So while the future Ethereum prices are tempting, you need insight into the current market movements. As of 2022, ETH is still a developing concept and needs some time until the Merge effects are in motion. Therefore, it would only be wise to invest once you have an idea of the token’s long-term.
