Ether is down 15% since the major upgrade of the Ethereum network, as traders take profits and worry about interest rate hikes


Ethereum underwent a massive network upgrade called the merge, which proponents say will make transactions much more energy efficient. Post-merger, ether prices have fallen after a massive run up ahead of the event.

Jakub Porzycki | Nurfoto | Getty Images

Ether has fallen more than bitcoin since the cryptocurrency’s underlying technology, the Ethereum network, has undergone a massive upgrade dubbed “the merger.”

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

The merge is an upgrade to Ethereum that changes the transaction validation mechanism from a proof-of-work method to a proof-of-stake. Proponents say this will make validating transactions on Ethereum much more energy efficient. It has been eagerly anticipated by the crypto community.

Despite the upgrade being successful, ether has fallen more than bitcoin.

Since September 15, the date the merger was completed, to Tuesday, ether has fallen about 15%. Bitcoin has fallen by about 5% over the same period.

Prior to the network upgrade, ether’s price roughly doubled from its June lows, much faster than bitcoin’s gains.

Vijay Ayyar, vice president of business development and international at crypto exchange Luno, said the merger was already “priced in” for ether and the “actual event was a ‘sell the news’ situation.”

Traders are also shifting investment from ether and other alternative digital currencies back to bitcoin, according to Ayyar, “as Bitcoin is expected to outperform a few months from now.”

What is the Ethereum merger?

Investors are also wondering whether ether’s regulatory status could change after the merger after U.S. Securities and Exchange Commission chairman Gary Gensler indicated last week that cryptocurrencies operating under the proof-of-stake model would apply. is on Ethereum, can be classified as a security. That would put it under the purview of regulators.

Gensler, whose comments were reported by several news outlets, did not specifically mention ether. The proof-of-stake model means that investors “bet” or lock up their ether and earn returns for it.

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

Rate increases still in the picture

Crypto investors are also on edge for an expected rate hike from the US Federal Reserve this week.

Central banks around the world have raised interest rates to cope with rampant inflation. But that has hurt risky assets like stocks. Cryptocurrencies are closely correlated with US stock markets, especially the tech-heavy Nasdaq. As stocks remain under pressure, crypto has also felt the heat.

Inflation in the US came in higher than expected in August, which hit stocks and crypto.

“Also from a macro perspective, inflation came out higher and therefore caused a sell-off in all markets, but ethereum and altcoins sold harder as they are in the riskier part of the crypto spectrum,” Ayyar said. .

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

But any “change in the macro environment in terms of inflation or interest rate surprises is certainly cause for concern,” he said, adding that if bitcoin falls below $18,000, cryptocurrency could test levels as high as $14,000.

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