Last week we witnessed one of the most anticipated events in the cryptocurrency industry – the transition of Ethereum to a consensus algorithm based on Proof of Stake.
Despite the fundamental change in the dynamics of its issuance, the cryptocurrency has fallen by more than 20% since the merger occurred in an event that led to a “news sale” type of short-term price development.
Ethereum Merges Successfully, But ETH Price Is Losing
Ethereum abandoned the Proof of Work consensus algorithm for Proof of Stake on September 15, 2022. This was arguably the most significant event in the industry this year.
At the time of the merger, ETH was trading at around $1,600 and even climbing to around $1,650 in the hours that followed. However, that was when the bears took full control of the market, sending prices to a two-month low below $1,300. At the time of writing, ETH is trading at around $1,330, down 8% in the last 24 hours and about 20% since the merger.
This led many to believe that the event turned into what the industry describes as “rumor buying and news selling”. In other words, investors bought ETH when the merger date was announced earlier this year and sold it when the actual event occurred.
Another possible reason for the drop could be the fact that many people were able to buy ETH in anticipation of the ETHW flight. It is also worth noting that the macroeconomic situation remains challenging, and the market awaits the Fed’s latest rate decision later this week.
Total Benefits of ETH
Regardless of price behavior in the short term, ETH sees serious market-related benefits after the merger.
Specifically, this is a massive change in daily ETH emissions. Data shows that the supply of new ETH in the market has fallen by more than 90% compared to what it was during the Proof of Work era.
Below is a simulation of how the Proof of Work version compares to the current version, the POS version, and also to Bitcoin.
As we saw above, the issuance of ETH has dropped significantly – something that should in theory have a beneficial price effect, given that the demand for the cryptocurrency remains the same or increases in the future.
The Ethereum merger then turns into a selling news event as the price of ETH is down 20% since its debut on CryptoPotato.