September 25, 2022

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Ether has fallen more than bitcoin since the cryptocurrency’s underlying technology, the Ethereum network, is called a “merge”.

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

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Merge is an upgrade to Ethereum that changes the verification mechanism for transactions from a proof-of-work method to a proof-of-stake. Proponents say this will make transactions on Ethereum more energy efficient. It has been eagerly awaited by the crypto community.

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Despite the upgrade being successful, Ether has fallen more than Bitcoin.

Ether is down 15.2% since September 15, the date the merge was completed, as of Tuesday. Bitcoin is down 4.4% in the same period.

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

Vijay Iyer, Vice President of Corporate Development and International at crypto exchange Luno, said the merge was already “pricey” for Ether and that the “real event was a ‘news sell’ situation.”

According to Iyer, traders are shifting investments from ether and other alternative digital coins back to bitcoin, “because the expectation is that bitcoin will outperform for a few months from here.”

Investors are also wondering whether the regulatory status of ether may be changing, as US Securities and Exchange Commission Chairman Gary Gensler indicated last week, which operates on a proof-of-stake model that operates on Ethereum. Applicable, can be classified. Security. This will bring it under the purview of the regulators.

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Gensler, whose comments were reported by many news outlet, not specifically named Ether. The proof-of-stake model involves investors “staking” or locking up their ether and earning a return for doing so.

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

Rate hike still in focus

Crypto investors are also on edge ahead of the expected interest rate hike by the US Federal Reserve this week.

Central banks around the world are raising interest rates largely to combat inflation. But this has hurt riskier assets like stocks. Cryptocurrencies have had a close relationship with US stock markets, particularly the tech-heavy Nasdaq. With stocks remaining under pressure, crypto has also felt the heat.

Inflation in the US exceeded expectations in August, affecting stocks and crypto.

“Even from a macro perspective, inflation came in higher, and so all markets were sold off, but Ethereum and altcoins sold harder, as they are along the more risky part of the crypto spectrum,” Iyer said. ,

According to Iyer, bitcoin has been trading in the range of around $18,000 to $25,000 since June, the level at which investors are buying.

But any “changes in the macro environment, in terms of interest rate surprise inflation, are certainly cause for concern,” he added, adding that the cryptocurrency could test the $14,000 low if bitcoin falls below $18,000. .