Former BitMEX CEO believes The Merge will rally Ethereum similar to Bitcoin halving

Former BitMEX CEO Arthur Hayes recently detailed how he anticipates Ethereum traders to behave both before and after Ethereum’s The Merge event in his most recent blog post.

Based on the technological aspects of the upgrade, he predicts that ETH will increase in value following a smooth transition in September, just like Bitcoin does when it is halved.

Hayes bases his bullish argument in a post titled “ETH-flexive” on George Soros’ “theory of reflexivity.” According to the theory, market prices and market players’ expectations for a certain market situation are in a feedback loop.

Due to the reflexive relationship between Ethereum’s price and its deflationary characteristics in the scope of the merging, Hayes thinks that this occurrence can boost the price of the world’s largest altcoin.

“If the merge is successful, traders will buy Ether, knowing that the higher the value goes, the more the [Ethereum] network will be used and the more deflationary it will become, driving value higher, causing the network to be used more, and so on and so forth. This is a virtuous circle for bulls,” he explained.

The merge will bring about two significant changes for Ethereum: it will replace its proof-of-work consensus mechanism with proof-of-stake, and it will also cut ETH’s supply issuance rate by almost 90%. Moreover, it will also make ETH more environmentally friendly. Some have dubbed the event the “triple halving” as a result of this.

The co-founder also pointed out that, in the event of a failed merger, this feedback loop might act against ETH, bringing its price down. The spot market activity of ETH, which has recently outpaced Bitcoin significantly, indicates that market players anticipate a successful merge event.

What will The Merge bring?

Many believe that ETH will eventually turn into a net-deflationary currency as a result of the upgrade, especially when combined with EIP-1559, which burns ETH out of circulation with every transaction. Hayes believes that a feedback loop could develop between ETH’s price growth, adoption, and deflationary issuance.

However, recently, while reacting to this misconception, “The Merge will reduce gas fees,” the ETH Foundation said that it is wholly incorrect. It was noted that gas fees are not related to the network’s capacity and are a product of the demand placed on it.