Last week, we saw one of the most 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 more than 20% since the merger took place in an event that led to a short-term “sell the news” development .
Ethereum merges successfully, but ETH price is better
Ethereum abandoned the Proof of Work consensus algorithm for Proof of Stake on September 15, 2022. This was undoubtedly the biggest event in the industry this year.
At the time of the merger, ETH was trading around $1,600 and even rose to around $1,650 in the hours after. However, that’s when the bears took full control of the market and sent prices to a two-month low below $1,300. At the time of writing, ETH is trading around $1,330, down 8% in the last 24 hours and around 20% since the merger.
This led many to believe the event became what the trades described as a “buy the rumor, sell the news” trigger. In other words, investors bought ETH when the merger date 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 may have bought ETH in anticipation of the ETHW airdrop. It is also worth noting that the macroeconomic situation remains difficult, and the market is awaiting the Fed’s latest decision on interest rates later this week.
Macro advantages for ETH price
Regardless of how the price is behaving in the short-term, ETH is seeing serious market-related gains post-merger.
In other words, this is a massive change in the daily issuance of ETH. Data shows that the supply of new ETH in the market has decreased by more than 90% compared to what it was during the PoW era.
Below is a simulation of how PoW issuance compares to current PoS issuance, as well as Bitcoin.
As seen above, the issuance of ETH has fallen dramatically, which in theory should have a beneficial impact on prices, given that demand for the cryptocurrency remains the same or increases in the future
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