Ethereum Merge has Brought Massive Disappointment to Investors! 65% Fall

Ethereum Merge took place on September 15 and the ETH token has failed to recover ever since.

Ethereum (ETH) is the second most-valued cryptocurrency in the world. For the past few months, investors were eagerly waiting for the Ethereum Merge to happen and it did on September 15, 2022. But ever since the Ethereum Merge took place, the Ethereum price has been on a downward spiral. Seeing the blockchain's switchover to a proof-of-stake mechanism from a proof-of-work model. While it was largely expected that ETH price will see notable gains on the board following the Merge, the reality was rendered to be quite the opposite. Alongside, most other popular altcoins, including Bitcoin (BTC) itself saw a terrible weekend marked by deeply plunging prices. The Ethereum Classic (ETC) token turned out to be the biggest loser in the last 24 hours, with a loss of over 17 percent.

Before the Merge, creating Ethereum tokens required an energy-intensive process called proof of work. That meant using massive amounts of computing power to solve complex mathematical problems to add transactions to the blockchain. Now, Ethereum has switched to an eco-friendlier method known as proof of stake. Ethereum was able to approach the US$1,800 price market but was rejected from those levels due to some critical macroeconomic events. Trading firm QCP Capital recorded a lack of activity from the market in the days previous to "The Merge".

In that sense, the event went from operating as a potential price catalyzer in either direction to a "volatility killer". The most uncertain after about the migration to PoS, the firm believes, was the ETH forks and the miners attempting to claim a portion of the cryptocurrency's market share.

However, the ETH forks were a "disappointment" as the proponents failed to convince the market about their future and potential to replace ETH PoS. QCP Capital noted:

The market finally came to terms with ETHW as a potential massive disappointment the last week, following their "totally" whitepaper release (9 pages of "this page is intentionally left blank"). Coupled with the chain ID debacle, meaning nobody will be able to actually test the chain pre-fork.

Still, the market might experience some volatility as large players unwind their "Merge" positions. QCP Capital concluded: Longer-term the ETH POS should be bullish, but we are not expecting an immediate breakout move post-merge. We are anticipating a huge pressure on the ETH vols post-merge.

Investors who rode ETH's rally going into the Merge may have sold their positions. "Large liquidations of leveraged long positions across derivatives markets exacerbated the drop in spot prices," according to a report from crypto data firm Kaiko that attempted to explain why ETH has fallen so much after the Merge.

The Merge Upgrade is an Inspiration for all Crypto Developers

Ethereum's Merge will boost crypto prices in the long run and will significantly change the future of the digital asset market. Even though the upgrade is based on the ETH network, it will power innovations throughout the crypto ecosystem. Cryptocurrency trading and investing are also speculated to rise in recent years, as the overall market value of digital assets skyrockets. The primary attraction of the Merge is, that it will change Ethereum to proof-of-stake. Earlier, the crypto used the same consensus mechanism as Bitcoin's which was extremely energy-intensive and used huge amounts of electricity to process new transactions on the network. But the proof-of-stake mechanism operates in a different way which is far more sustainable.

The proof-of-stake algorithm uses validators. A validator can basically be anybody who possesses at least 32 ETH tokens to stake in the network. Users can also participate with smaller amounts of tokens through staking pools or cryptocurrency exchanges. Using this way, the developers claim that the network will become 99% more efficient and sustainable. However, the upgrade does not solve other ETH network issues that might increase the cryptocurrency's capacity to process transactions but hold on, those upgrades are all lined up to be implemented, now that the Merge has been released.

What does the shift to the PoS network really mean for investors?

Experts claim that for ordinary investors, the Merge should mean nothing. Ideally, investors have been excited about the upgrade because it is only supposed to help crypto prices surge and change the price dynamics of the market. Quicker transactions and lower fees might eventually benefit investors in the long term, but it would also add more value to Ethereum's native token, ETH, which investors can use to make transactions across multiple platforms. The integration of the PoS is helping the crypto add more investors to its network, besides when the supply of tokens decreases, the value of individual coins will increase, which might then generate some value for traders. The Merge is also expected to make the network more secure, protecting investors from random attacks and thefts.

However, the emergence of the Merge does not mean that Ethereum is no more volatile. Right after the launch of the Merge upgrade, the ETH price dropped. Currently, at the time of writing this article, Ethereum is hovering around the US$1,300 mark. The Merge will definitely have a positive effect on the price of Ethereum, but those effects might not be longstanding, and the price upside will definitely not be sustainable. Hence, investors still have to be extremely careful before investing in Ethereum and other cryptos.