đ„CNBC Analyst Brian Kelly Warns Upcoming Ethereum Merge Is Riskier Than Traders Realize – Here’s Whyđ„
The CEO of digital currency investment firm BKCM is weighing in on the prospects for Ethereum (ETH) just weeks before the project initiates a major network upgrade.
In a new episode of Fast Money, CNBC contributor Brian Kelly first mentions how Ethereum investors might not be earning as big of a payday for profitable trades as expected due to ETHâs inflation mechanism.
âI think itâs probably more âsell the news,â which is maybe not that intuitive because in crypto you generally want to buy the news. But everybody has been buying Ethereum because theyâre going into this merge and now youâre going to get a so-called yield.
Just so you know, itâs not really a yield. Youâre just getting your inflation rewards back, so itâs kind of offsetting the inflation in the currency. Itâs not really a yield.â
Kelly expects investor excitement in advance of ETHâs mid-September switch from a proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism will inevitably lead to a sell-off, đbut warns that there is also the possibility of confusion or outright failure which could negatively affect Ethereumâs price as well as the project itself.
đâThereâs probably a higher potential for a sell-the-news event going into the merge.
đYou could also have a technical glitch. Not only [that], but there are a lot of questions about what the apps are going to do if Ethereum splits again.
đYou could have a chain fork and now not one, but two or three different Ethereums. Then what does your DApp (decentralized application) go on and play on?
đI think that thereâs more risk to the Ethereum merge than people are giving credit for.â
Looking at the economy more broadly, the analyst discusses cryptocurrenciesâ correlation to the tech stock sector while highlighting the fundamental differences between Bitcoin (BTC) and Ethereum.
âItâs been very high. Bitcoin correlation with the Nasdaq is somewhere around 60%. Ethereum correlation with the Nasdaq is somewhere around 70% for the rolling last 30 days. Crypto is effectively acting like a 2x-levered, triple-Q ETF [exchange traded fund].
I think thereâs some nuance here, in that Bitcoin itself is not a tech stock. It is definitively an alternative currency. It is digital gold. You need it when your country destroys its currency, like a lot of governments are doing today.
Ethereum, on the other hand, can be somewhat thought of as a tech stock because đit is going to disrupt a lot of what tech stocks are doing today.
To the extent that it takes daily active users away from places like Twitter and Facebook and Google, I do think there is something to be said for Ethereum being a tech stock.â
At time of writing, ETH is priced at $1,578 and BTC is trading for $19,983
https://dailyhodl.com/2022/09/03/cnbc-analyst-brian-kelly-warns-upcoming-ethereum-merge-is-riskier-than-traders-realize-heres-why