How will the Ethereum Merge impact Bitcoin?

While Ethereum fans celebrated the merge last week, Bitcoiners were not so enthusiastic about this event.

Ethereum just went way off into fantasy land at the exact wrong time. It just looks stupid.

Some say Ethereum's successful transition to a less energy consuming system could have serious consequences on Bitcoin. If it doesn't follow Ethereum's example, Bitcoin could lose its status as the leading cryptocurrency.

They say all assets compete for liquidity, so it's completely disingenuous to say that Bitcoin and Ethereum don't compete.

But is the Ethereum merge really a threat to Bitcoin dominance? And how is this event going to impact the competition between the two leading cryptocurrencies? To answer these questions, we sat down with Corey Clipston, the CEO of Swan Bitcoin and a vocal Ethereum critic. But before we get started, consider leaving a like and subscribing to our channel and subscribe. Hi, I'm Giovanni, your host and this is a Cointelegraph interview. Last week the Ethereum community was celebrating the completion of the Ethereum merge. On the other hand, you were writing on Twitter that the day of the merge was the day Ethereum committed to a slow slide into irrelevance and eventual death. What is your main argument against the Ethereum merge?

Yeah, so I mean, just first principles. Proof of stake inherently introduces politics into a would be decentralized network and makes the achievement of that goal in the long run impossible. So if you don't have some tethering to the real world using laws of physics, you're basically off creating some kind of like metaverse fantasy land. Like Vitalik himself described in a video.

Last week, Proof of work is based on the laws of physics and so you sort of have to work with the world as it is. Whereas because proof of stake is virtualized in this way, it's basically letting us create a simulated universe that has its own laws of physics.

People are starting to realize how sort of immature his vision for what this thing is supposed to become. I think that's becoming very, very clear to people who are looking at this, causing even Etherians to wonder who it is they've been following and what is this fantastical ideology behind this move to something that's never worked before and is kind of just like honestly a poor replication of the fiat system that we already have today.

Still, the Ethereum post merge is consuming 99% less energy than previously and it's still, still works fine. Also, Vitalik said that this was one of the largest decarbonization events in history. So don't you see anything valuable in this?

To the credit of many Ethereum fans, this is kind of a minority it seems like, but it's very noisy for the kind of promoters out of bankless and consensus essentially attacking bit where Bitcoin on ESG and climate green narratives. And you know, this is something that Vitalik obviously promotes and it's kind of the number one marketing claim for the Ethereum management team at this point is, you know, we don't waste energy. Right. And you also haven't created anything of value for the long term though because you've gone to proof of stake and proof of stake is inherently politicizing and centralizing. So like there's literally nothing new that was created here. Like you could create a car that uses no energy, but it's just going to sit there like you have to use energy if you want to create something of value. So I don't know, it's just, I think it's a very immature and it's very expedient to make these arguments. But where we're heading with Bitcoin, it's reasonable that something this valuable that's going to essentially organize better, more productive, higher growth, human economic activity and cooperation for the next few millennia at least I think it's reasonable that that would use something like, you know, as much as air conditioning uses in the southern United States or something like that. I don't think that's a big ask, frankly. The world is waking up to the necessity of energy use as Germany is facing winter with Russia controlling their gas supplies, as even BlackRock. And Larry Fink, he's probably the biggest promoter of ESG investing, has completely, completely backtracked. And it's like, you know, more or less turning blackrock in a different direction. I think the world is just waking up to reality and Ethereum just went way off into fantasy land at the exact wrong time. And I think, you know, that's probably part of why you see, you know, the, at least in the short term, the reduction in price is like just really bad timing to roll out that narrative. It just looks stupid.

Okay, that's an interesting take. Still, bitcoiners have been lashing out at Ethereum more than usual in the last few days. It seems like that they are concerned that the Ethereum merge could somehow undermine Bitcoin.

No, I think bitcoiners generally like truth and they really just kind of dislike liars and scammers and lying and scamming broadly. And so when they see something that shows up in the same publications that they get asked about on TV interviews and they have to answer those, I think you can understand that they would answer to the best of their ability, to the best of their knowledge and try to tell the truth. The truth being that this thing is an emperor that has no clothes and won't be around for the long term. And the narratives around this move to proof of stake are false. And I don't think it's abnormal for there to be, you know, some, some junior members of either community getting a little chippy, saying some mean things. That's pretty normal at the end of the day, you know, anything. All assets compete for liquidity. So it's completely disingenuous to say that Bitcoin and Ethereum don't compete. They don't compete for money because Bitcoin is money and Ethereum is not in the long run. They don't compete for whatever smart contract, you know, ecosystem exists because those things will all migrate onto higher levels of Bitcoin over time. It's just going to take a long ass time because that's how these things work.

Okay, so it seems that you don't see anything valuable at all in the Ethereum merge. Not even from the point of view of technological feat. There are a lot of bitcoiners that have been complementing the Ethereum Ethereum community for this achievement which is being compared as changing the engine of an airplane while in flight.

Well, it hasn't been achieved. We have to wait, you know, we have to wait five to 10 years to see if this thing actually functions and doesn't break. I mean it takes a while for the incentives to play out. You know, you've already seen that. I think 2/3 of 2/3 of stake is by four parties at this point and I think two have over 50%. I mean the mempool jumped up to like 450,000 transactions waiting to get through a couple days ago. It's going to take a long time to see if this thing actually works in any way. And even when it does it inherently, again because it's proof of stake, it is political, it can be captured, you can go after people, it's not state free, it can't be money. And I think kind of the best case, the best case outcome for Ethereum fans is to deliberately seek to be co opted by banks and governments and become part of the existing system.

Contra Bitcoin, environmental groups such as Greenpeace have been calling for Bitcoin to follow the example of Ethereum and switch to a proof of stake system. And even Environmental working Group, US based environmental group said that they are going to invest $1 million to campaign urging Bitcoin to switch to proof of stake. So are you concerned about these initiatives and what results are they going to achieve in, in your view?

Yeah, I mean those are just fundraising initiatives. So maybe they took some donations from the altcoin industry and I think Chris Larson from Ripples trying to provide $5 million to lie about Bitcoin and proof of work. I don't know where the money's coming in for that, but I do know the goal is for just them to make as much noise as possible and get more donations. So you know, they don't know what they're talking about. They're what. The information that they're putting out is long ago disproved and just kind of like asinine to publish under their name. It's embarrassing for me as someone who grew up in the Bay Area and Seattle and you know, kind of liked Greenpeace and Sierra Club and some of these things and to see Greenpeace kind of metastasize into sort of like an arm for scammers, marketing contra something that actually is for human freedom, that actually advances the causes of renewables, that balances energy grids.

Still this environmental narrative seem to be quite influential among regulators and policymakers. We saw a couple of weeks ago the White House published a paper where it was recommending proof of work cryptocurrencies to move away from this system and switch to more sustainable models. So don't you think that the Ethereum merge, the success of the Ethereum merge could have the result of putting more regulatory pressure on Bitcoin?

Yeah, I mean there's a lot of different jurisdictions and you know, in the US we have a federated system where states can do pretty much whatever they want. So. So nothing's going to happen across the whole country of the United States and country by country. You saw 45, 50% of the hash rate drop from China last summer, but they're already back to. I think I just saw like 20% of the hash rate coming from China again, even though it's banned. So it's very, very difficult to control these things that humans can just do wherever they want, whenever they want, including bribing local officials in third world countries or in China or whatever. Like you're never going to stop this thing. It's out of the Pandora's box. The incentives are there regardless of what.

Regulators might or might not do. Many say that the switch of Ethereum to a proof of stake, more sustainable, less energy consuming system could potentially attract more institutional capital to Ethereum and that that institutional capital could be drawn away from Bitcoin. So are you not concerned about this scenario?

These narratives that end up being pumped up by the crypto rags and the mainstream media and stuff for the most part are all just noise. You got to zoom out, you got to understand the facts of the situation. You know, there are very few institutional investors that have gone deep. When they do go very deep, like Fidelity has for eight years, they've explored everything. Usually they end up Bitcoin only like Fidelity did.

Okay, so you don't see this flow of capital moving away from Bitcoin into Ethereum because of the.

Not at all. Not at all. In fact, like, you know, the biggest bulge bracket, you know, IB that got into Altcoins and Ethereum the last few years is basically just cut almost their entire staff related to pumping these things. So, you know, I don't know if I'm at liberty to say that, but it's, you know, a top three IB and one of the top two that's been playing in the space and they're just like kind of done with it for now anyway.

Okay, so final question. You previously said that Ethereum and Bitcoin compete for liquidity. So I'm curious, how do you see this competition between Bitcoin and Ethereum playing out in the years to come?

If there's a store of value premium in tech stocks and people are just like trying to store their wealth there and it's not really justified by the earnings and reasonable PE ratios. That excess will get sucked up by Bitcoin. No Altcoin stands a chance. They're all just like weak stepsisters at best. And this is a global battle for liquidity. It will take decades to play out. But in the end, in present day dollars, the global market for store value is like 400 trillion. And Bitcoin is the best tool for that job by far that we've ever had. And it will take some percentage of that over some period of time. I fully expect Ethereum to continue to bleed out. Right? It hit like 80% in May of 2017. Seems to have peaked around like 50, 55% this time around. You know, I've tweeted I'd probably stick to my estimation that I think it'll, it'll peak at some future bitcoin bull market when shitcoins pump again. You know, I think it'll probably go way down between now and then, and then eventually peak at like 20 or 25%. And then the one after that it'll be 5 or 10%. It's following the same path as Bitcoin Cash. It's just taking longer because, you know, they had an ICO and they have a bunch of companies focused on pumping this thing all the time. Yeah.

I mean, we are going to see how this competition between Bitcoin and Ethereum will play out. I think that both assets still haven't basically disclose their full potential. So it's super exciting to see what the next years will bring. And yeah, thanks, Corey, for the cool discussion. It was awesome to have you on our show.

I really appreciate you and Cointelegraph for having me on and presenting a Bitcoiner voice through your channel. So appreciate it.