RRecently, Ethereum underwent its last dry run for a “merge”. Changes to its consensus mechanism are expected to make it faster and more energy efficient. One of Ethereum’s test networks, called Goerly, simulated a process that would be performed by the mainnet in September. Such testnets allow developers to experiment and make necessary changes before launching updates on the main blockchain.
A week ago, Ethereum (ETH) had been making the news given its escalation amidst the upgradation announcements. Ether soared to a two-month high after the developers successfully completed a final rehearsal for the pivotal upgradation set to happen next month.
However, now, the price of ETH seems to be falling. After a strong rally in the last 45 days since the beginning of July 2022, the crypto market is now seeing a downward trend again. The broader crypto market is retreating for the fourth day in a row, with top two giants Bitcoin and Ethereum also making an impact.
ETH is currently trading at a price of $1,850 and a market cap of $225 billion. Since the beginning of July, ETH had managed to surge by almost 100% before beginning to retract at the start of this week.
This comes even as the asset is surrounded by exceptionally positive bullish momentum due to the much-anticipated merger due next month.
Digital data scientist at Cowen Digital, David Kroger, said that the institutional investors are already gearing up for the Merge. In his conversation with Bloomberg, Kroger said, “Institutions have been asking us about the Merge, along with the technicalities and probabilities associated with it for several months now”.
kroger added “Some players are taking profits at the current level. This could be the reason behind the recent fall in prices.
Hype In The Crypto Space
About a month ago, the hype surrounding Ethereum’s Merge pushed its price up by 40%. While ether’s price was still down 75% from its November all-time high, investors were seen taking advantage of the market downturn by buying the dip ahead of it. Many predicted that Ethereum’s massive software update, scheduled around September 15, could significantly boost its value because it promises to make the network more efficient, faster, and cheaper to use.
Martin Hisboeck, Head of Blockchain and Crypto Research at Uphold, said “While Ethereum’s price action certainly gives hope for the overall market to turn a corner in the next few weeks, the sudden surge is mostly driven by hype and perhaps a lack of understanding of what ‘The Merge’ will actually do. “
However, this excitement does not seem to be holding up too well.
Merge Excitement Fizzled Out?
Some detractors have been working to fork the Ethereum blockchain even after the constant support for the Merge coming in from the ETH community. The detractors are none other than the ETH Miners who are preferring to stick to the ongoing PoW mechanism of Ethereum.
Nevertheless, Ethereum co-founder Vitalik Buterin vehemently opposed the miners’ move. He explained that his team will no longer support Ethereum PoW after the complete change to the PoS model.
As the merger draws closer, market experts are watching the developments. BitMEX CEO Arthur Hayes commented that traders will be short on ETH if the merge does not succeed.
Arthur wrote, “If the merge is not successful, there will be a negatively reflexive relationship between the price and the amount of currency deflation. Therefore, in this scenario, I believe traders will either go short or choose not to own ETH.”However, Arthur also explained that a successful Merge will take the Ethereum price even higher. He elaborated, “If the merge is successful… traders will buy ETH today, knowing that the higher the price goes, the more the network will be used and the more deflationary it will become, driving the price higher, causing the network to be used more, and so on and so forth.”
