The Ethereum Merge (i.e. The Merge) successfully completed on September 15, 2022, which upgrades the network from PoW (Proof-of-Work) to PoS (Proof-of-Stake). This aims to scale the network and reduce energy consumption, making Ethereum more efficient. The Ethereum blockchain will be able to process transactions faster and at the same time will consume less power. This is just part of the final upgrade to Ethereum 2.0 (ETH2) which will finally address the issues of congestion (for faster performance) and high transaction costs on the network.
There were concerns of a glitch occurring during the upgrade. There was also anticipation for a hard fork among PoW miners, who want to continue mining ETH (Ether) instead of transitioning to PoS. So far there have been no major incidents, other than the network missing 1 block 12 minutes after the upgrade. The ETHPoW and ETHW proceeded with a hard fork of Ethereum, but encountered some problems along the way. These hard forks are also uncertain in regards to how long they can last unless they have users. The majority of users of the Ethereum network, including exchanges and developers, have thrown their support for The Merge rather than any hard fork that may arise.
Despite the upgrade success, the market did not respond well. ETH prices actually plummeted from a high in the $1,700+ range to below $1,200+. By September 20, it has recovered to price level above $1,300+ (on CoinMarketCap). The plunge in price does not seem to make much sense since there were no network failures and no security incidents to be concerned about. There had been assumptions prior to The Merge of ETH prices dropping. That is more due to speculation, from market manipulation used by whales and traders to hype up the price of ETH.
ETH prices did increase in the weeks before The Merge. When it reached a peak in the $1,700 range, traders would be in profit by selling post-Merge if they had bought at a lower price range. This then drives prices down, but it creates opportunities for investors to buy the dip. This is nothing new and has been happening in crypto for a long time now.
Unfortunately, this comes at a bad time for investors and holders of ETH. This comes amidst interest rate hikes from the US Federal Reserves to curb inflation. The persistence of inflation means that the Feds could continue to increase interest rates, and this is affecting the market. News about SEC regulations on ETH have also been received negatively. Although the CFTC have stated that ETH was considered a commodity that will be under them, the SEC by their own definition could consider it a security. We have to follow what the final ruling on that will be.
The sell-off could all be short term effects. When the value from the upgrade is realized, the price can recover. ETH will be the token for DeFi protocols, NFTs (Non-Fungible Tokens) and dApps (Decentralized Applications). Institutions will also view the Ethereum network in a more positive light since it now has less carbon footprint and more efficiency. With increased demand, will come increased utility of ETH that can drive prices higher in the long term. What is important is for projects to successfully implement their use of the Ethereum blockchain to add further value to ETH as an asset. What is certain is that the market can still determine the price, even if there is plenty of manipulation and speculation.
