In our recent article, we discussed just how much the media can impact the financial stock market. One tweet from Elon Musk can send a coin to the moon, while the US inflation report can result in markers losing 10-20% of their cap.
More tweets from Elon Musk: https://twitter.com/elonmusk
We decided to take a closer look at one of the biggest crypto events of the month, and probably, the whole year — the Merge. Having taken place on September 15th, 2022, marked the transition of the Ethereum blockchain to the Proof-of-Stake algorithm. Let’s see how the event impacted the market.
Ethereum confirms the Merge for 15-16 September 2022
Although ETH‘s switch from PoW to PoS took years to prepare and develop, there were a lot of doubts it was even happening in 2022. Thus, when the Ethereum developers community confirmed the Merge for the 15-16th of September on their Consensus Layer Call, the coin’s price began to surge. In the following two days, the ETH quotes increased 20%, reaching a local high of over $2,000 on August, 14th.
However, once the market excitement due to the upcoming transition was over, Ethereum began to plummet due to the overall financial downtrend and global uncertainty. By the 29th of September, ETH was already below $1,500.
Two weeks before the Merge
Following the local low, Ethereum started to partially recover — on the 11th of September the coin surpassed $1,750. At this point, the entire potential for the price surge was spent. Once the Merge took place, the second-biggest cryptocurrency demonstrated a steady decline. Currently, the ETH price ranges from $1,400 – $1,300.
Why did the ETH price go down instead of up?
Many wonders why the Ethereum price is decreasing after the Merge. The reason is the overall market sentiment: we have record-high inflation, constant interest rate spikes with more to come, and a full-scale war in the middle of Europe. All these macroeconomic factors force professional investors to refrain from volatile assets and crypto beginners investors to panic sell.
Moreover, the drop was accompanied by a drastic increase in the ETH volumes. Presumably, many traders chose to take profits and close their long positions before the Merge, pushing the price down.
What should we learn from this?
Major platform updates can significantly impact market sentiment. Although it’s not always possible to determine whether a surge or drop is coming, you should expect a higher level of volatility. Yes, even higher than usual.