Last week, we saw one of the most highly-anticipated events in the cryptocurrency industry – Ethereum’s transition to a consensus algorithm based on Proof of Stake.
Despite the fundamental change in its emission dynamics, the cryptocurrency is down over 20% since the Merge took place in an event that resulted in a “sell the news” type of short-term development in the price.
Ethereum Merges Successfully, but ETH Price Takes a Beating
Ethereum abandoned the Proof of Work consensus algorithm for Proof of Stake on September 15th, 2022. This was undoubtedly the most important event in the industry this year.
At the time of the Merge, ETH was trading at around $1,600 and even surged to about $1,650 in the hours after it. However, it was then when the bears took full control of the market and sent the prices to a 2-month low below $1,300. At the time of this writing, ETH is trading at around $1,330, down 8% in the past 24 hours and around 20% since the Merge.
This propelled many to believe that the event turned into what trades describe as a “buy the rumor, sell the news” trigger. In other words, investors bought ETH when the date of the Merge was announced earlier this year and sold it when the actual event took place.
Another possible reason for the drop could be the fact that many people could have bought ETH in anticipation of the ETHW airdrop. It’s also worth noting that the macroeconomic situation remains challenging, and the market is in anticipation of the latest Fed decision on the interest rates later this week.
Macro Benefits for ETH’s Price
Regardless of how the price is behaving in the short term, ETH is seeing serious market-related benefits after the Merge.
Namely, this is a massive change in the daily ETH issuance. Data shows that the supply of new ETH on the market has declined by over 90% as opposed to what it was during the PoW era.
The following is a simulation on how the PoW issuance compares to the current, PoS issuance, as well as to Bitcoin.
As seen above, the issuance of ETH has dropped drammatically – something that should, in theory, have beneficial price impact, considering the demand for the cryptocurrency remains the same or increases going forward.
The post Ethereum Merge Turns Into Sell the News Event as ETH Price Plummets 20% Since appeared first on CryptoPotato.
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