In preparation for ETH 2.0 - Market moves, Mining changes, Plan B
ethereum coin

In preparation for ETH 2.0 - Market moves, Mining changes, Plan B

By 0x90 | Crypto Overview | 11 Oct 2021


Latest news on the Merge

The planned date of the long awaited ETH2.0 merge was originally set to this August, then September, November, December. In the previous weeks, Ethereum core developers were planning an optimistic January, or a realistic late February for the update. The ever-changing dates are confusing as hell, so we address to find out the truth on our own.

There is a so-called difficulty bomb currently in the system, which incentivizes miners to switch to the PoS model as early as the first week of December, 2021. That time, Ethereum mining would be not profitable on its own, because block times will have been significantly increased. This difficulty bomb is the ultimate switch for the two versions of the network, in the air for ages. It prevents an accidental fork of PoW and PoS networks.

Now, Tim Beiko announced that they are planning to delay this bomb yet again, scheduled to May, 2022. That suggest us, the development and testnet testing of Ethereum 2.0 should be finished by somewhere around late February - early March. At least, this is what core developers are expecting momentarily.

The last days of GPU mining

We have to address the mining profitability issue. For a pretty long time, ETH mining was greatly profitable and trending. EIP-1559 might have scared away a few miners, but the general hashrate recovered pretty soon. Previous merge dates were also contributing to a bit slower hashrate growth than we'd expect, but now that we received a pretty good guess, it's finally time for math!

Let's plan for 1st of March next year. The remaining 140 days should yield us ~$300 revenue with one of the most popular chips, RX580, which has a current market price of about $490. If sold for $190+ at that time, we break even. That's a very possible price, given that RX580 chips with 4Gb memory, unsuitable for Ethereum mining are currently going for the same price, $200-$220ish.

If market conditions don't change significantly, this gives us a risk-reward ratio of 1. That's the worst case scenario, easy money back.

If we factor in that the possible BTC market would drag ETH upwards (they still correlate significantly in price movements), we should expect somewhere between $5000 to $8000 ETH price, according to the S2F model interpolated to ETH and factoring in BTC/ETH correlation. That would yield a 200-300% return on investment until the merge date.

That's why, there still are people late in the game, joining the ETH mining community.

As always, alternate costs have to be considered: the chance that another coin or token you would otherwise buy skyrockets while you're sitting in your mining equipment investment.

Mining after ETH 2.0

There are still a couple of Proof-of-Work coins, which you can mine after the merge, namely ETC, ERG and RVN. Usability suggests that Ergo should be trending upwards in the long term as well. (i.e. a Binance or Coinbase listing would greatly help mass adoption of the Ergo network.) These work with lower size DAGs than the Ethereum network currently, so it will be still profitable to mine on 4Gb memory chips. Since currently overpriced 8 to 12Gb chips will not be in mass demand, they are expected to drop in price early next year, and maybe so do some of the 4Gb GPUs, but to a lesser extent.

The great price drop ahead

Imagine the moment when it gets possible to swap BETH for ETH. Since there are better money-making alternatives than ETH staking with its 4-5% APY, holders will sell BETH (and ETH) in masses. That predicts a large price drop as soon as this gets possible. Be wary! Staked Ether could easily move to liquidity pools, yield farming providers, et cetera.

Alternative investments for the next months

If ETH fails to keep up with the current growth of BTC, it would still be wise to keep ETH in the portfolio for a later rally, however count with the risk, that specific Layer 2 tokens (Polygon/MATIC) or certain coins (Polkadot, Solana), could overtake in popularity. Ethereum developers fight with time everyday, but the mass adoption of alternative smart contract networks could lead to a disaster if they fail to do so.

It's wise to keep multiple coins in your portfolio and do your own research on the projects and the risk involved. Don't just watch ETH struggling if the rest of the market goes to the moon. Despite after a BTC rally, ETH and alts always followed, Ethereum is not the only player of its kind on the market like it used to be. 

 

Disclaimer: This article does not constitute investment or financial advice. Take professional consultancy to evaluate and address your investments and financial situation. You assume the sole responsibility of evaluating the merits and risks associated with the use of any information provided.

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