What's a "Flippening"?

built on. Ether's market value is still about half that of bitcoins, but a recent surge a whopping fifty since mid June has some fans hoping it will unseat that number one crypto. There's even a word for this theoretical event. It's called the flippening. So could Ether overtake Bitcoin, which would upend more than a decade's worth of eminence and

what would that mean for the future of crypto. To better explain what exactly the flippening is, I'm joined by Bloomberg Reports, Olga careif that's been in the works for years in the years and it's been delayed so many times, and Vildonna Herrick. It just has a lot of people excited in terms of pitting the two against each other. Olga Veldonna, what a pleasure to have you both here. We are going to talk about Ether today, how exciting, which seems to be. It is very exciting. It seems

to be the thing that everybody is talking about. But we have to explain why it's exciting to us, because I feel like our threshold for excitement is probably different from the general population. So Olga, I'm going to start with you. You know, we're still in a crypto environment of mostly falling prices. We're still in a market in which Bitcoin remains number one by pretty much every metric.

But there's been, you know, just especially in the past couple of weeks, significantly more interest and activity around Ether and the Ethereum blockchain. What's going on? So what's driving all of this excitement is that finally the so called Etherium merge is drawing near. What it is is basically a software upgrade to the Ethereum blockchain which will make

the blockchain much more energy efficient. And it's been in the works for years and years, and it's been delayed so many times, and now finally finally we have a date or sort of date range. We we think it's going to happen in September. So investors are super excited about this. There is a lot of enthusiasm around Ethereum with the fact that this upgrade looks likely in the middle of September, so we have a date for it.

It looks like things are on track, and so there's really a lot of enthusiasm right now about its potential to perform in the coming months. But why are they excited? What exactly does this of the upgrade enable that is causing you either prices to rally. So today, the way transactions are ordered on the Ethereum blockchain is so called miners use very power hungry computers to do the job. Essentially,

they solve very complex mathematical problems to order transactions. And after the merge, after the software upgrade, what will have is essentially a much more energy efficient way to do the same task. Etherorym will become about more energy efficient and the way this will be done is that the transaction ordering will be done by so called validators, which will be essentially entities that you use stacks of coins

to order transactions. Investors and basically developers and users of the blockchain are excited about the potential of having a more energy efficient blockchain. And bold. How has that excitement manifested in prices. Prices, as we just mentioned, have been rallying, and they've actually been surging. So if we look maybe over the mid July to the mid August period, Ether alone has surged about fift and so when I see surging, I really mean surging. It's just been bonkers to be

watching some of these charts. But just to to give a little bit more context, if I can take just a small step back, this is important because Bitcoin has always been seen as sort of the supreme leader of the crypto space. It's the original cryptocurrency, it's been around the longest, it has the best name recognition. Even if you ask people on the street about crypto, they might use bitcoin to mean crypto. It's just something that the

greatest number of people are familiar with. And so to see Ether rallying, Ether is the number two token by market value, to see it rallying, it just has a lot of people excited in terms of pitting the two against each other, and many investors looking at the prices and thinking that maybe, just possibly Ether surge could help

overtake it in terms of market dominance versus Bitcoin. Now there's a word for this potential overtaking, which is, as are many things in crypto, slightly ridiculous, and it's it's flippening. The flippening, that's the flippening. But I mean either's market value the last time I checked was you know, two hundred maybe two hundred and ten billion. Bitcoin is more than twice that. Like, we would have to be talking

hella surge for this to happen. Why why are people betting betting on a hell of surge in addition to the price activity we're seeing right now. So so Bitcoin's market cap in mid August was about four hundred and sixty billion. Ether is about two billion. So what these what the flippening potentially signifies is that we would see Ether's market value be higher than bitcoins. As you said, the gap is still very very large, it's huge, it

would have to double. I think partly it's a little bit of speculation where you have investors who are looking to take advantage of the price rally potentially getting in thinking that others are going to be doing the same and that the price can continue to skyrocket as it has been. And I mean it's it's a little bit funny because the notes that I get in my inbox. They in a very cute, cute see way, say when flippening w e n flippening meaning when is it potentially

going to be happening. It's just sort of crypto slang for when this event might occur where you have Ether surpassing Bitcoin. But the reasoning behind it is sort of, you know, from from the investors I'm I'm speaking with, They're excited about Ether, They're excited about the potential possibilities to end the you know, saving energy when this upgrade

does happen. And then I think the other side also being that it is a little bit of speculation where people are trying to take advantage of the rally, a little bit or a lot of speculation depending on the day. But I want to go back to something that you said. You know that one of the biggest changes here is the the overall energy efficiency or you know what fans are saying will be like a much improved energy efficient situation. That doesn't seem like something like an end user necessarily

cares about. Right, It's like, Okay, great, this thing that I'm invested in is no longer as harmful for the environments like good but not does not necessarily have like an immediate price impact. Are there other things in addition to the speculation or the possibility of speculation that build on and mentioned that people are betting on in the future.

People are betting that because Ethereum is now going to be very different from bitcoin in terms of its e s G profile, in terms of its environmental impact, people are betting that many institutional investors who have avoided crypto because of its environmental impact will actually give Ethereum a second look, maybe some investors who are not interested in bitcoin because it's such a big gobbler of energy. And also people are excited about future upgrades to ethereum. You know,

this is not the last one. This is a very very major upgrade, probably the most ambitious upgrade to any blockchain ever. But once it's completed, there are more changes planned.

And you know, if this upgrade goes without a hitch or with with maybe just a few hiccups, then people are gonna feel very confident in the community of developed is behind Ethereum and feel confident that they will implement further upgrades that will increase the black chain's capacity and implement a host of other features which will be super attractive for application developers and could further expand the ecosystem of ethereum. So I'm hearing, I'm hearing a couple of

things from you. The first is that this move to improved energy efficiency makes it more attractive, as you've said, to a certain kind of institutional investor who might have commitments or requirements or constraints around you know, the the e s G like the green stamp of approval on a particular investments in their portfolio. And there are frankly lots of those kinds of investors out there, and they

control heroic amount of capital. But the other thing I'm hearing is, folks, see this is something that unlocks future value. And I really do want to emphasize you know, both of you have described this as a software of grade, and it's like it's really a software upgrade, right. It's like a bunch of computers that are going to get

new software that is going to enable different things. But as we also know, software grades sometimes go terribly wrong, like you install the latest operation on your machine and suddenly none of your apps will open, or your phone refuses to charge. You know, I think the technical glitches are a real thing. What are some of the concerns

that people have around this. Basically, when you look at the history of upgrades in Ethereum or other block chains, very often you see problems shortly after the upgrade, and they can last for weeks or even months. If we look at one, Ethereum, for example, went through a different so called fork, essentially it's split into two different block chains. One was the current version, the main version that's running today. The second was Ethereum Classic, which kind of stayed with

the previous software version. What happened shortly after the shift to the new software was, for example, there were a lot of replay attacks where the same coin was sort of being spent twice. And there can be all kinds of bugs found in software. Of course, this this this new Ethereum software that's going to be implemented in September.

I mean, arguably it's been tested to death, but still you know it's it's been tested in so called test nets, which are essentially, you know, smaller versions of the big change that's coming. But you know it tests is never the real thing, So you cannot test every sort of use case. You cannot always find out, you know, all the different bugs that somebody might want to exploit when

when the shift happens. So I think a lot of people wouldn't be surprised to see a bunch of replay attacks and other hiccups when the shift does happen, and the replay attack is kind of, you know, your worst nightmare. If your proposition is there can be only one of anything, and that's part of part of the appeal of this thing, It's like, no, actually, there can be too, and that that seems like a big problem for folks, for folks involved.

Up next, you'll hear more from Bloomberg Reports, Olga Karif and Vildonna Herrick on what the flip thing might mean for the future of the digital asset market. Vldonna, I want to ask you just a question about a story that you wrote about how crypto deervatives and specifically UM are signaling that this rally and ETHA might not in fact have legs. This is really interesting and it's it's almost like the story that's happening around this right now,

especially in you know, when you're watching the markets. As Alga mentioned, there's a lot of people saying that the upgrade might not go as smoothly that a lot of things could still go wrong. I've had more than one analyst or you know, somebody, a market watcher, somebody who's watching the space very closely say to me that consensus almost seems to be that everything will go right, and if it doesn't, then you know a lot of people

might not be positioned for that. So, like we said, there's this huge rally, and then we have investors still betting that the rally can continue. And if we look at the derivatives market, we have derivatives traders buying options to bet that ETHER will continue to advance into the merge so into September. As Alga mentioned, we think it will happen sometime in September, and we also have traders positioning for a sell the news type of event once

the actual emerge takes place. So this is a little bit complex, but maybe we can speak about it in a sort of simple way. There's a lot of call up and buying. So call options people are betting on further upside and price going up. The price going up that's right into the merge, and then they're buying downside protection for after it happens and the options market is showing us this. The rivatives market is showing us this.

They're buying downside protection for after the events. So after September, people are positioning in a way that they think that the price actually might go down, and they're positioning for it right now because they're trying to take advantage of it when it actually happens. So everything we're talking about, we can actually see it sort of playing out in the market and what investors, what these professional investors are

thinking might happen, and how it might play out. So if we were to draw us on a chart, essentially though, the options market is showing the price of Ether continuing to rally up to about the middle of September, which is when the mergers people are hoping that it will finally happen, and then declar lining fairly steadily after after that point. What are kind of the price extremes, like what is the expected high and what is the sort

of the lowest that folks are currently betting on. So in mid August we have Ether trading around eighteen hundred, nine hundred, and then the options market is showing that a lot of traders are betting it could hit hundred but even as far as five thousand, so that would be huge. That would be this this this Hella rally. That would be the flippening right, that would be that Hella Hella rally or whatever we called it earlier. So so yeah, there's a lot of of of betting on

the price, really continuing to search. So Vildana, we have this, you know, an options and derivatives, pretty liquid market, pretty large, a lot of people who supposedly know what they're doing in there. Do other types of investors look at this to get cues on what could happen to their portfolios.

I think we can make a parallel to the stock our kid, where you also have derivatives traders, professional investors looking at maybe a certain event, so for example, maybe a company announcing their earnings results, and then you have investors betting on how the stock might move, and they

might be looking at historical precedent. Maybe Netflix is a good example of this because it tends to swing just hugely when it reports earnings, like we tend to see double digit moves for for the stock on its uh post earnings announcements. So maybe we can make a parallel to something like that where you have a lot of people trying to take advantage of the same event, trying to position themselves in a way that they think they

can actually make money off of it. But I think it's very tough because it doesn't always play out the way even that the herd thinks it might right. Group think is not always correct. In other words, well, Olga of Oldonna, it is always a pleasure to have you on the podcast. Thank you so much for joining us. Thank you thanks for having us. You can find more of both their reporting on the Bloomberg Terminal on Bloomberg

dot com or follow them on Twitter. Olga is at Olga Karif that's O l G A k h A r I F. And vil Donna is at Vildonna Herrick That's v I L d A n A H A j r I C. On the next episode of Bloomberg Crypto. This Crypto winter has resulted in significant individual losses, as well as a handful of company bankruptcy filings and more than one CEO looking for a new job. Join us for a discussion about one of the more prominent figures in bitcoin, Michael Sailor, the now former CEO of micro Strategy.

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