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Is The Merge a "misfire"? Ethereum discounted by 25%

Is The Merge a "misfire"? Ethereum discounted by 25%

created Simon peters20 Września 2022

Last week, major cryptocurrencies such as bitcoin and ethereum hit new lows. This was because the sell-off among major assets, from gold to stocks, also pushed the cryptocurrency market downward.

Bitcoin it had a tough week, even though it hit above $ 22 on Tuesday for the first time since August this year. The world's largest cryptocurrency saw prices plummet later in the week, peaking yesterday at eToro platform low $ 18 after a series of negative economic indicators plunged the markets. Currently, it is around $ 105.

Ethereummeanwhile, experienced a similar sell-off, with the added burden of expectation from the ethereum network associated with The Merge. Last Tuesday, the token was above $ 1, but yesterday fell to a low level of just under $ 700. It currently stands at around $ 1.

The Merge appears to have had some short-term effect on the price, with a significant drop in the immediate aftermath of its launch. But looking more broadly, even at the seven-day performance, observers may see the token clearly moving side by side with other risk assets in the face of fresh negative economic indicators.

The Merge will not be judged on the basis of multi-day results

The decline in ethereum's value over the past few days will be considered evidence of the failure and overrated The Merge. However - like any investment and any market - it will not be judged on the basis of just a small slice of the results.

The Merge was inherently a long-term change to the way the ethereum network is managed and utilized. The promise of a miraculous overnight change is the curse of mature, long-term sustainability and should be handled with caution by all investor watchers.

Ethereum's price has dropped below the recent $ 1 mark, but there is a much wider market battle at stake that distracts investors from major network improvements. Price volatility affects the entire cryptocurrency sector, and this is due to major macroeconomic factors beyond its control - in the same way that stocks experience significant sell-offs.

Investors considering their position at this point - those who strongly believe in long-term examples of cryptocurrency use such as bitcoin or ethereum - should make sure they are prepared for more volatility in the future as the economy's fortunes do not seem to be turning around yet. However, the long-term investment thesis should be a more important indicator than just market movement.

Bitcoin mining difficulty reaches record levels

The difficulties of mining bitcoin and its hashrate set all-time records. ATHs appear despite the significant weakness of the token's price. A bitcoin hashrate is essentially the total computing power of the network, the number of passwords generated and filled per second.

Wskaźnik hashrate usually increases due to greater competition between miners. In this case, ATH could be a signal that miners are moving away from ethereum and moving to other cryptocurrencies proof-of-worksuch as bitcoin. A trend that has been going on for several weeks.

A large group of miners and a high level of competition on the web that forces the hashrate to increase is basically a good thing. Although it is not correlated with the price, the more miners on the Internet, the safer it is. It is also a signal that is common in bearish times, when hinterland utilization and development continues despite price drops, and can be interpreted as a positive long-term indicator.

Solana's daily transactions are growing rapidly

Reminder for cryptocurrency enthusiasts - Solana, a key competitor of the ethereum network, has seen significant growth in transactions over the past few months, according to data from Nansen. As of April, the Solana network has seen an exponential increase in daily transactions with over 40 million a day, up from around 20 million at the start of the second quarter.

While according to Nansen data, Solan's transaction volumes are much more volatile than ethereum's, it is clear that in terms of usability as a network, it is now a real competitor. Major Dapps such as Mango Markets, StepN and Magic Eden contributed to the significant increase in flow. Ethereum transactions have also dropped somewhat, which may indicate a behavior change ahead of The Merge, however this will not be clarified until future reports.

Solana now has a very healthy ecosystem of companies and projects using the platform for their cryptocurrency activities. It is a positive sign for the wider market that such a diverse ecosystem is thriving even at a time of depressed valuations.

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About the Author
Simon peters
eToro analyst. A graduate of the Faculty of Mechanical Engineering at Brunel University in London. He is CFA UK Level 4 certified in Investment Management.