Adam Cochran: ETH 2.0 Could be the Largest Economic Shift Ever
Partner at Metacartel Ventures, Adam Cochran, has shared his thoughts about Ethereum 2.0 and why it could become a turning point.
As he writes, the 1st reason of 7 are rent seekers and the possibility that they may switch to Ethereum once PoS is running. He mentioned that these kind of investors seek for stable returns of 3-5%.
In case a large amount of ETH are bought in order to make these returns on staking, this could result to the situation that the supply shock would push the prices up. As Cochran says, this price surge could cause a 2nd round of staking investments due to multiplied returns.
“So now we have rent seekers creating supply shock, and we have secondary round ripple effects,” as Cochran writes. As a result, the market could go up, causing FOMO among retail investors. Generally, they react late; still their actions could have a significant impact like in 2017.
The next reason is actual demand for the asset and as Cochran emphasized, it’s the best one. He underlines Metcalfe’s Law, which in simple words means – the more actual demand, the higher prices due to the created real value for the user.
One more factor is mentioned whale cycles, as profits taken from lower prices can be reinvested to make more profits. The growth of the nodes in the network through staking creates a ‘race condition’ where whales have to purchase more to maintain their earnings rate.
Another factor that could cause the demand growth is rounding up investments to reach the required 32 ETH staking limit. In addition, to keep to round-up stakable amounts of ETH, more money could be flowed into the market.
The last reason Adam Cochran names the most important one: “Reason #7: Burning for Flat Supply with EIP-1559: EIP-1559 is a way to change the fees on the Ethereum blockchain take place.”
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