Why is the price of Ethereum still in free fall after The Merge event? It seems that reducing pollution does not solve the problem.
The cryptocurrency market is not experiencing its best months. The fall is more than 70% in practically all virtual currencies. Ethereum and Bitcoin, the 2 most encouraging options in terms of price, have not been saved from burning. Although the bleeding seems to have stopped, the truth is that significant recoveries are not taking place, which may affect investor confidence. And it will not be because of innovation that is taking place. Tell Ethereum and its new operating system.
This branch of the world blockchain has a serious problem related to ecology. Mining involves more energy consumption than entire countries, so proposals are being carried out to reduce dependence on it. The most notorious case has been that of Ethereum, the cryptocurrency that has replaced the modality proof of work per protocol proof of stake. What does this mean? Before, transactions required the energetic work of computer equipment. Now, everything is based on the consensus of participation.
The average investor thought that this would break one of the problems with technology: pollution. However, the share price has only fallen since the announcement of the change of operation of this proposal on September 15. Has The Merge been a flop? There had been talk of this change in operations for many months, but this does not seem to have satisfied the markets, which continue to have a strong bearish momentum.
The bears still own the Ethereum price
Ethereum has been dragged, like the rest of the cryptocurrencies in the market, into a downward trend from which it seems to be very difficult to get out. The incorporation of solutions capable of reduce pollution by up to 99% does not seem to be enough to calm the cravings of the bears. Also known as La Fusión, it does not seem to have achieved a consensus in the market. It is enough to take a look at the price experienced in recent days to understand to what extent the current situation is serious.
Observing the graph at one month, it can be seen how a peak of 1,776 dollars per unit was reached. Currently, it is listed, at the end of the edition, at 1,330 dollars, assuming a drop of up to 17%. Taking into account that between both moments only a total of 10 days have elapsed, we can see how the performance has not been as expected. Even so, it is still early to know how this change in protocol will affect technology. Ethereum is experiencing a moment of important changes, something that can change its business model.
Buying into the Merge is solely based on price going up
the #ETH price is largely based on demand to use the network
When ETH is in high demand like it was in 2021, its price goes up
Right now the network is just not in high demand
— Matthew Hyland (@MatthewHyland_) August 20, 2022
Well, what is happening in relation to Ethereum and other cryptocurrencies that depend on the Ethereum network such as Ether? The common problem is that the demand for transactions has been reduced noticeably in recent months. This is a fact that did not happen in 2021, a year that experienced strong price increases due to high demand.
The macroeconomic context, without a doubt, does not help too much either. We are at a time when there are significant growth rates in prices, so interest rate hikes have become the main instrument taken by central banks. This reduces consumption and investment, something that has been reflected in the cryptocurrency industry and other investment proposals for months.
Secondly, geopolitical tensions don’t help either. To the problem that is being experienced in Ukraine due to the invasion of Russia, we must add the conflicts that are taking place in Taiwan. The threat of invasion by China could put the world economy in check. Will cryptocurrencies soar over the next few months? It seems that the situation is still very difficult for the markets.