Cryptocurrencies have had more downs than ups this year. Total crypto market value has dropped from more than $2 trillion to barely $1 trillion. But it's important to remember this is due to general market sentiment. In times of economic trouble, investors retreat from risky assets.
If we look specifically at various cryptocurrencies, we can find plenty of exciting news. In fact, two major players are ready to launch key upgrades in September: Ethereum (ETH 0.90%) and Cardano (ADA -0.06%). That's why this month could be crucial for these blockchains and their investors.
1. Ethereum
Ethereum, the world's second-biggest cryptocurrency by market cap, expects to launch the Merge around Sept. 15. This is part of a general upgrade meant to reduce energy consumption, congestion on the network, and transaction fees. The big update also will increase transaction speed on the blockchain.
How will all of that happen? Through a move to the proof-of-stake validation process from proof of work. And by sharding, a method of splitting tasks across the network.
The blockchain has already started the process. It's launched the Beacon chain as a test of proof of stake. This eliminates the complex computation tasks needed to validate transactions. Instead, validation power goes to the biggest stakeholders. This will cut energy use by more than 99%.
This month, Ethereum will merge the Beacon chain with its mainnet. And proof of stake will become the permanent validation method. Sharding is set to happen next year. That will take care of congestion, transaction fees, and speed. These are all key elements for future success.
2. Cardano
Cardano has something in common with Ethereum. Charles Hoskinson was involved in the creation of both blockchains. He was involved with Ethereum first, then moved on to launch Cardano. Now both projects have another thing in common: important upgrades just ahead.
Cardano aims to launch the Vasil hard fork this month (we don't have a specific date). This is a major upgrade meant to boost the user experience and the ability to scale operations down the road.
One of the elements of this upgrade includes pipelining. This has to do with how blocks of data move through the network. Usually, a block goes through several steps one after the other. Pipelining allows some of these steps to happen simultaneously.
Hoskinson even predicted in a tweet this spring that developers of decentralized applications are waiting for the Vasil hard fork before launching.
And there's more to come. Cardano also is working on the Hydra Head scaling solution. This major project will help Cardano increase speed and the volume of data it can handle at one time, and shorten the time it takes to complete a transaction.
What does this mean for investors?
The upgrades set for September could offer Ethereum and Cardano a lift if all goes smoothly. Both cryptocurrencies have posted double-digit declines this year.
If these upgrades run into problems, though, investors won't be happy. And that could send Ethereum and Cardano prices even lower. We also could see a bit of volatility this month as investors speculate about the outcome of the upgrades.
Considering the potential volatility and the risk of any glitches in the updates' rollout, cautious investors might not want to jump in right now. It's probably best to wait until this key moment has passed.
That said, I remain positive about these two crypto leaders over the long term. So if you can tolerate some volatility and the risk of bumps along the road, now could be a great time to get in on the story.
