It’s official… Ethereum (ETH)’s groundbreaking upgrade is happening in roughly 48 hours.
If you’ve been following along, you know this is the biggest event in crypto since the launch of Ethereum seven years ago.
Chief Analyst Stephen McBride’s been preparing his readers for this event for nearly a year. And now it’s all over the news.
But today, I have a favor to ask...
I want you to forget all the phrases you may have heard recently like “Ethereum 2.0”... “The Merge”... “Proof of stake.”
And this isn’t about whether or not you believe ETH will transform finance.
When it comes to making money now, none of that matters as much as good old supply and demand.
Today’s RiskHedge Report is about the massive supply shock Ethereum is about to experience… and how this supply shock could force Ethereum’s price to skyrocket.
I’ve brought in Stephen to share all the details...
Chris Reilly: Stephen, you say Ethereum’s coming Merge is really an extreme supply shock. Can you explain?
Stephen McBride: Let’s quickly start with the basics. As you know, supply and demand sets the price for everything in this world. The gas you put in your car, the groceries you buy for dinner, even your salary.
It’s the first law of economics.
When an item is in high demand, people will pay more for it.
For example, before COVID you could buy a box of masks for less than $4. Once the pandemic hit and everyone needed them, the price spiked to $30.
And when something is in low supply, prices tend to spike. When global supply chains collapsed during COVID, the availability of lumber dropped to record lows. The price of a 2x4 shot up from $2.60 to $10.
That’s the dynamic. Lower supply lifts prices.
Chris: What does this have to do with Ethereum?
Stephen: A giant supply shock is about to hit Ethereum. A supply shock is when supply plunges very quickly.
This will be one for the record books.
In short: At the precise moment of Ethereum’s upgrade, something dramatic will happen…
Ethereum creation will drop by 90% in an instant…
This is a huge deal.
Right now, Ethereum prints thousands of new tokens every day. But in roughly 48 hours, all Ethereum mining shuts off—forever.
It will throw the supply and demand of Ethereum into an extreme imbalance.
A supply shock of this size and quickness has never happened before, as far as I know.
It's like Saudi Arabia, Russia, and the United States all closing their oil pumps at the same time.
In that scenario, gas prices could hit $50/gallon.
Because the world would burn far more oil than it produces.
As far as crypto, we’ve only ever seen something like this with bitcoin’s “halvings”...
In short, newly mined bitcoin gets cut in half every four years.
Bitcoin’s had three halvings over the past 12 years. And its price skyrocketed after each one: 7,967%, 2,867%, and 667%.
But if you think those are extreme supply shocks...
Consider ETH is essentially squeezing three bitcoin halvings into a single day. A 90% drop, which Ethereum is about to experience, is equal to cutting its new supply in half… in half again… and in half a 3rd time… all in an instant.
But there’s another reason why this supply shock will be much bigger than anything bitcoin’s seen.
Chris: How so?
Stephen: As longtime readers know, Ethereum is very different from bitcoin. Unlike bitcoin, which doesn’t produce anything, Ethereum is a platform that “apps” can be built on.
Think of all the apps you use on your smart phone every day. Ethereum has thousands of apps built on its platform. Some of them cost Ethereum’s token, ETH, to use. There are other “fees” associated with using Ethereum, too.
Essentially, every time Ethereum is used in one of those ways, a tiny fraction of it “burns.” It’s deleted from existence, forever.
Chris: So, once the upgrade happens, ETH creation will come to a screeching halt. But ETH will keep burning?
Stephen: Exactly. Suddenly, demand will vastly exceed new supply.
It will be the ultimate supply shock…
And we know how prices react to supply shocks.
Chris: So how do you suggest playing this?
Stephen: If you want an easy way to play it—buy Ethereum. It was already one of my top cryptos before the upgrade, and this makes it a must-own asset.
But if you want a more leveraged, likely more profitable way—look beyond the most obvious trade.
Seek out the tiny cryptos set to benefit from Ethereum’s upgrade.
In short: This little-known crypto has a virtual monopoly on a technology that’s key to Ethereum’s upgrade.
Executive Editor, RiskHedge