Ethereum price plunges 15% after merger despite bullish anticipation

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After undergoing the historic Merge upgrade, the value of Ethereum (ETH) continued to correct despite the event being touted as bullish for the price of the asset. The drop comes after the second-largest cryptocurrency by market capitalization showed signs of recovery despite depressed market conditions.

In particular, at press time, Ethereum was trading at $1,360, down about 15% from the $1,600 price recorded on September 15 when the Merge upgrade was officially rolled out.

The impact of the anticipation of the merger saw Ethereum surge around 85% from June, when the price appeared to stagnate.

1 year Ethereum price chart. CoinMarketCap.

Interestingly, Ethereum’s performance eclipsed pre-merger Bitcoin (BTC), which has since struggled to stay above $20,000. However, after the upgrade, Bitcoin was only down about 3%.

Crypto research platform Kaiko noted:

“In what many were expecting to be a positive week for Ether price, a successful meltdown ended up preceding a selloff of around 25% on the week.”

Bitcoin and Ethereum price chart. Source: Kaiko.

Along this line, several factors were touted as the primary triggers for Ether’s downfall, with the majority classifying the meltdown as a “buy the rumour, sell the news” event.

For example, Meltem Demirors, chief strategy officer of a crypto asset management firm CoinSharespredicted that investors should not expect a significant rally from Ethereum, noting that prevailing market conditions with high inflation could deter capital inflows into decentralized crypto finance (DeFi).

Impact of Fed policies

Like other risky assets, Ethereum faces the impact of Federal Reserve policies aimed at controlling inflation. After disappointing August inflation data, the Fed is expected to raise interest rates as digital assets are likely to react negatively.

“From a macro point of view also, inflation has increased and therefore caused a sell-off in all markets, but Ethereum and altcoins have sold harder, given that they are in the riskiest part. of the crypto spectrum,” said Vijay Ayyar, vice president of business development and international at crypto exchange Luno.

Similarly, it can be argued that Ethereum’s inability to rally post-merger is due to pending related upgrades that have yet to take effect. In particular, the network is preparing for the Shanghai upgrade aimed at introducing fundamental changes in the functionalities of the Ethereum virtual machine of the blockchain.

Therefore, as reported by Finbold, cryptocurrency exchange Kraken announced that ETH withdrawal will remain unavailable until the Shanghai upgrade is complete.

The long-term impact of the merger

In the long term, there are projections that the merger will trigger a rally in Ethereum primarily fueled by institutional contribution. However, given the prevailing macroeconomic factors, it seems that the institutions are acting cautiously.

The possibility of higher prices also stems from the fact that the Proof-of-Stake (PoS) switch will make Ethereum a deflationary asset since it will likely limit the number of new tokens issued. It is worth pointing out that the merger was successfully completed without any hitches, which helped to alleviate the previous problems.

In this line, Antoni Trenchev, the co-founder of crypto lending platform Nexo, pointed out that there is no guarantee that the upgrade will inspire a rally in the price of Ethereum (ETH) because it would depend on the success of his transition.

Disclaimer: The content of this site should not be considered investment advice. The investment is speculative. When you invest, your capital is at risk.

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