What happened 

Crypto values jumped early on Thursday as Ethereum (ETH 2.41%) moved a few steps closer to "The Merge." This is generally seen as a bullish move for crypto use cases because Ethereum has the largest base of developers and many tokens are on the Ethereum blockchain.

The value of Ethereum was up as much as 7.9% in the last 24 hours as of 1 p.m. ET. Bitcoin (BTC 5.82%) had jumped 6.2%, and Dogecoin (DOGE 20.53%) was up 8.2% at its peak. 

So what 

At 1:45 a.m. UTC (9:45 p.m. ET on Wednesday), the Goerli testnet moved from proof-of-work to proof-of-stake, the last test before the main blockchain will make such a move. Goerli is an active test blockchain where developers can see if new systems work as planned before moving to the main blockchain. Ethereum has gone through a number of tests ahead of the transition to proof-of-stake operations to find potential bugs and this is the last one expected before the final merge. 

The official merge has been scheduled for mid-September and this is intended to improve the blockchain in a number of ways. Validation of blocks, or transactions, will be done through staking rather than energy-intensive computations. This will lower the energy consumption of Ethereum by over 99%. It will not, notably, make transactions less costly. 

The Merge is the first in a series of planned upgrades that could allow Ethereum to complete 100,000 transactions per second. These upgrades could take a long time, but co-founder Vitalik Buterin has laid out the development plans already. 

Now what 

Today's move is really nothing more than speculation that "The Merge" will lead to increased activity on Ethereum and in the crypto ecosystem more broadly. But this may not have a fundamental impact on the blockchain at all. 

High costs and slow speeds are still a headwind for Ethereum and the biggest reason costs have come down recently is the fact that there's less activity on the blockchain. The Merge won't change that underlying fact. 

I would like to see greater activity before being too bullish on Ethereum. The blockchain has been losing market share to smaller, faster blockchains and I think that's a bigger threat than most investors realize. And if future upgrades take years like The Merge did it may leave Ethereum behind the curve. 

Crypto has also been rising along with equity markets over the last few weeks. Investors have been in a "risk-on" trade mindset, buying riskier assets in search of returns. That's helped crypto, but doesn't change the underlying investment thesis at all. The crypto winter is still here and if blockchain activity doesn't pick up I am afraid this bounce won't last.