It is no secret that last Thursday’s popular Ethereum (ETH) merger upgrade, which was described as one of the defining moments in cryptocurrency history, has fared less than expected.
Even worse than the climate impact, ETH responded with a fair run as investors sold the news after buying into the hype.
Now that The Merge has come and gone, ETH’s next primary catalyst will likely be The Surge, when the implementation of hashing technology will greatly increase the scalability of the platform.
It could happen next year at some point, but no deadline has been set.
In the meantime, we all want to know how long post-consolidation depression will last. With that in mind, let’s check out the latest market performance from ETH.
Ether (ETH): Where is it?
Although ETH has a strong finish to this week, it is still down over 20% since last Thursday’s massive consolidation event, trading at $1,320 at the time of writing.
The 50 day moving averages comfortably track the 100 day moving average, which gives a very clear indication of the continuation of the downtrend.
However, as we know, no cryptocurrency is an island, and the dominance of ETH over Bitcoin (BTC) paints a much rosier picture.
The Blockchain Center’s “Flippening Index,” which tracks the market capitalization of ETH against BTC, shows that ETH remains historically strong against BTC.
Flipping refers to the moment when ETH’s market cap exceeds BTC’s market cap – Source: blockchaincentre.net
“One might argue that ETH/BTC staying here in the depths of a bear market is encouraging given that ETH is on high beta,” said Brent Donnelly of Spectra Markets.
But Donnelly followed him up with a cold bucket of water: “As the merger ends, ETH faces hundreds of competing PoS tokens, BTC faces PoW-free competition, and ETH is facing higher regulatory risks than BTC… ETH / BTC Too High. “
This view indicates an overvalued ETH position with further declines on the way.
“I would much rather be long BTC than ETH at the moment,” Donnelly said.
ETH is also facing downside risks from another direction.
Miners give up
Ethereum’s move from PoW to PoS has left many crypto miners confused and wondering what to do with their suddenly unrelated mining hardware.
While some are seeking returns with other altcoins, many, including the largest ETH miner, are simply shutting down their operations.
These miners have amassed huge amounts of Ethereum over the years and are now giving up by flooding the market with their holdings, thus weakening the supply.
This dilution is causing the price of ETH to fall.
That’s one theory anyway, and while it’s true that miners’ wallet balances have fallen sharply, one wonders if they’re nearly enough to cause any material impact.
Data from OKLink shows that between September 1 and 18, miners sold around 18,700 ETH, worth about $30 million.
ETH price tends to correlate with miners capitulating – Course: oklink.com
This seems to be negligible given that ETH volumes are often 10 times that in a single day… But sentiment is a powerful drug and it certainly hasn’t helped.
Ethereum conflicts with the SEC
As reported yesterday by Proactive, the US Securities and Exchange Commission (SEC) wasted no time in turning its hawkish eyes on Ethereum just as Vitalik Buterin celebrated a successful merger.
Since ETH is a PoS coin, it is 100%, without a doubt, no competition, legitimacy of an unregistered security, believes SEC President Gary Gensler (I paraphrase).
Whether he has a point or not, it seems highly likely that the SEC will try to fight it in the courts, even if a similar lawsuit against Ripple’s XRP token doesn’t quite work out.
As I said above, sentiment is a powerful medicine and there is no doubt that incorporating ETH into securities law would be a disaster.
But some believe that the SEC’s position on Ethereum is exaggerated.
“I don’t expect the SEC to take any formal steps to regulate ETH as collateral,” said Michael Carter, chief compliance officer at Bittrex.
“So far, the SEC has taken a variety of actions to claim actual responsibility and jurisdiction over all things crypto, but formal regulatory or legislative action to specifically put cryptocurrency under its umbrella is not among them.
Carter noted the SEC’s lack of rule-making efforts (despite the doubling of crypto assets and the e-unit in May).
Moreover, “It is also possible that the proposed rule to formally bring ETH or other cryptocurrencies under SEC supervision would require an opportunity for public comment on the proposal. And Carter suggested that such public comments might not be particularly welcome.”
Is it time to buy or sell ETH?
On the other hand, a short-term downside appears likely due to selling pressure, an overvalued position, and the poor condition of global markets in general.
Moreover, ETH miners are still holding $319 million in ETH stocks that threaten to further dilute the market.
So, if you are looking for a quick buck, try looking under the sofa.
But in the longer term, there are some potentially powerful catalytic events on the horizon. Not just the next big protocol upgrade dubbed The Surge, but Eth’S tokenomics which has been revamped after the merger – one of the less discussed features of The Merge is that it has essentially flipped ETH from an inflationary cryptocurrency to a deflationary one.
Although it may take some time before this has a noticeable effect, a smaller circulating supply will only drive up the market value of the coin, right?
we will see.