Ethereum is the second most popular crypto throughout the globe, with its market cap around $167 million as of the beginning of October, 2022. Recently on September 15, in what is the most ambitious upgrade in the history of the blockchain so far, Ethereum has transitioned from a proof of work consensus algorithm to a proof of stake one. This event, known as The Merge, has understandably drawn the attention of the broader crypto market.

Now that Ethereum’s transition from PoW to PoS is successfully over, many involved in crypto trading have their eyes trained on the performances of Bitcoin vs. Ethereum. Has the Ethereum Merge really given ETH the ultimate push to overtake Bitcoin after all these years? Let’s find out!

What is the Merge Upgrade, Really?

The Ethereum mainnet is differentiated from all the testenets that only dApp developers use. Back in the December of 2020, Ethereum developers created something called the ‘beacon chain’. Now, this beacon chain was a PoS chain, and it had been running in isolation before the Merge. 

The Ethereum Merge was basically the act of transferring all data held on the Ethereum mainnet to the beacon chain, which from now on will be the primary Ethereum chain. Now that this shift of data has happened, Ethereum’s old PoW system will be retired on the beacon chain. 

Bitcoin vs. Ethereum Post Merge: How are Both Cryptos Performing?

The Ethereum team had cited several reasons for the PoS shift before going forward with the Ethereum Merge; namely,

• The Merge would make Ethereum more energy-efficient. Indeed, the update has reportedly cut down on over 99% of PoW Ethereum’s power usage.
• The supply of ETH was expected to decrease by 90%.
• Ethereum would be able to decrease its block time marginally.

So now, after the Merge, Ethereum is supposed to have a lower inflation rate than Bitcoin. However, many are disappointed as the high Ethereum gas fees have not been decreased with the Merge. 

Bitcoin is often compared to gold- a store of value that does not experience large movements in prices over time. This allows Ethereum room to prove itself as a more sustainable alternative with time, becoming more portable and facilitating a wider range of use cases. With this in mind, there is indeed potential for Ethereum to ‘flip’ Bitcoin’s position post-Merge. 

The real-time happenings in the crypto market don’t suggest much in terms of an evaluation of which one between Bitcoin and Ethereum is winning the race post-Merge, however. As of the first week of October, Bitcoin has cleared the $20,000 resistance and come around $21,000.

(BTC/USD price chart for the past month)

Meanwhile, Ethereum is hovering around the $1,350 level. Economic factors like the threat of global runaway inflation are expected to affect the prices of crypto and other risky assets for a while now. 

(ETH/USD price chart for the past month)

Reasons Why ETH May Outperform BTC in the Long Run

The immediate effect of the Merge on Bitcoin is not much. This won’t come as a surprise if you know that Ethereum’s switch to proof of stake had been in the cards since the blockchain was fabricated. As Ethereum co-founder Anthony di Iorio said, “Proof of stake was a very important thing that was discussed since the very beginning and now it’s being carried out…. It’s been a long time coming”.

However, can the Merge lend Ethereum enough power to run ahead of Bitcoin in the future? Here are a few reasons that might happen:

• Most of the crypto tokens in the market today have been built on Ethereum, and with the Merge’s success, Ethereum would grow scalable enough with further upgrades for more and more developers to trust Ethereum. This might allow Ethereum to gradually overtake Bitcoin when it comes to both market cap and popularity.  
• The success of the Merge has validated the qualities of the proof of stake consensus mechanism in the eyes of those who were skeptical before. Now Bitcoin’s immense power consumption is being called out by a lot more in the crypto space, while Ethereum becomes the new favorite of institutional investors looking for crypto products that tick all the right ESG boxes. 
• Proof of work is still the algorithm most firmly proven when it comes to the security and decentralization factors. If proof of stake can satisfy these two requirements in the long term, PoS will admittedly be the more sustainable consensus mechanism, automatically giving Ethereum an edge over Bitcoin.

Conclusion

Will Ethereum gain the upper hand over Bitcoin in the long-term? The fate of the crypto largely depends on the performance of the proof of stake consensus algorithm. For now, Bitcoin’s proof of work consensus admittedly isn’t largely affected by the Merge. As for ETH, even that hasn’t seen much shift in its value amidst the bearish sentiments running high in the wider crypto space. Many seasoned traders opine that Ethereum might outperform Bitcoin in the short term, but what happens in the longer term? That remains to be seen.

As di Iorio had said before Merge: “The Merge is the biggest thing that has happened in a long time. How it’ll affect Bitcoin is unclear. We’ll just have to wait and see”. 

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