Ether (ETH) Drops 15% Since Ethereum Meltdown as Traders Earn Profits

Ether (ETH) Drops 15% Since Ethereum Meltdown as Traders Earn Profits

Ethereum underwent a major network upgrade called a merger that proponents claim will make transactions much more energy efficient. After the merger, ether prices fell after a big rally before the event.

Jakub Porzycki | Nurfoto | fake images

Ether has fallen more than bitcoin since the cryptocurrency’s underlying technology, the Ethereum network, underwent a major upgrade called a meltdown.

Ethereum is a blockchain technology that allows developers to build applications on top of it. Ether is the native cryptocurrency that runs on Ethereum.

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The merger is an update to Ethereum that changes the transaction validation mechanism from a proof-of-work method to a proof-of-stake method. Advocates say this will make transaction validation on Ethereum much more energy efficient and has been eagerly awaited by the crypto community.

Even though the upgrade was successful, ether has fallen more than bitcoin.

From September 15, the date the merger was completed, to around 4:30 am ET on Tuesday, the ether is down about 15%. Bitcoin has fallen by around 3% in the same period.

Before the network upgrade, the price of ether nearly doubled from the year’s low in June, far outpacing bitcoin’s gains.

Vijay Ayyar, vice president of international and corporate development at crypto exchange Luno, said the merger already had a “price” on ether and “the actual event was a ‘sell the news’ situation.”

Traders are also shifting investments from ether and other alternative digital currencies to bitcoin, according to Ayyar, “since the expectation is that Bitcoin will outperform for a few months from now.”

What is the Ethereum merger?

Investors are also wondering if ether’s regulatory position may change post-merger after US Securities and Exchange Commission Chairman Gary Gensler indicated last week that cryptocurrencies working on the model proof of stake, which applies to Ethereum, could be classified as a security. That would put it under the control of regulators.

Gensler, whose comments were reported by various media outlets, did not name ether specifically. The proof-of-stake model implies that investors “stake” or lock up their ether and earn profit for doing so.

“For Ethereum, there is another concern: PoS (proof-of-stake) crypto may come under SEC scrutiny,” said Yuya Hasegawa, a crypto market analyst at Japanese crypto exchange Bitbank.

Rate hikes remain in the spotlight

Cryptocurrency investors are also nervous about the expected interest rate hike from the US Federal Reserve this week.

Central banks around the world have been raising interest rates to deal with rampant inflation. But that has hit risky assets like stocks. Cryptocurrencies have been closely correlated with the US stock markets, in particular the tech-heavy Nasdaq. With stocks under pressure, cryptocurrencies have also felt the heat.

Inflation in the US in August was higher than expected, weighing on stocks and cryptocurrencies.

“Also from a macro perspective, inflation increased and thus caused a sell-off across markets, but Ethereum and altcoins sold off more as they are in the riskier part of the crypto spectrum,” Ayyar said. . .

Bitcoin has been trading in a range of around $18,000 to $25,000 since June, a level investors are buying at, according to Ayyar.

But any “changes in the macro environment in terms of inflation or interest rate surprises are definitely a cause for concern,” he said, adding that if Bitcoin falls below $18,000, the cryptocurrency could test levels as low as $14,000. .

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