Ethereum’s much-anticipated “Merge” is set to launch next week, but even that may not be enough to stop the bleeding of Bitcoin and the rest of the crypto market.
Bitcoin is taking down the crypto-currency market.
As is traditional in the crypto-currency market, September got off to a rocky start for bitcoin and crypto-currencies overall.
The world’s leading crypto currency extended its losing streak for weeks, falling below $19,000 for the first time since the crypto market liquidity crisis event in June. Bitcoin is trading at about $18,730 today, down 5.8 percent on the day. It is currently more than 70% away from its November 2021 peak.
Bitcoin’s latest collapse hit stocks like Ethereum, BNB, Cardano, and Solana even harder, leading to a market-wide decline that brought the global crypto-currency market capitalization below $1 trillion.
After the explosion of Three Arrows Capital And the subsequent collapse of crypto-currency lenders like Celsius and Voyager Digitalthe crypto-currency market has shown signs of recovery over the summer. Ethereum and other assets jumped more than 100 percent since the June low, helped in part by slowing inflation rates and relatively conservative Federal Reserve actions, but the market’s bullish momentum was challenged in mid-August when Bitcoin failed to break above $25,000. (On Aug. 26, Crypto and other asset classes took a big hit after Fed Chairman Jerome Powell warned of further “pains” for the markets in a speech in Jackson Hole; he reiterated that the U.S. central bank hopes to bring inflation down to 2 percent).
Can the merger save the market?
September has historically been a weak month for crypto-currencies, and last week saw the market extend its late summer slump. Over the past few weeks, traders have been considering the next ” merge ” of Ethereum to Proof-of-Stake as a possible catalyst for a takeover, helping Ethereum and other related assets like Lido and Ethereum Classic soar. Considered one of the most important crypto events in recent years, the merge kicked off in earnest on Tuesday with the successful activation of Ethereum’s Bellatrix upgrade, while the main event is expected to take place in about a week. Still, with bitcoin down, Ethereum and other assets have taken some big hits. Despite its summer run, ETH is currently trading at $1,508, about 69% below its all-time high.
With Bitcoin accounting for about 36.5% of the total crypto-currency market cap, the crypto-currency faithful are hoping that interest in the most prominent crypto-currency will return as it did for Ethereum over the summer.
The merger is expected to improve Ethereum’s energy efficiency by 99.99 percent and reduce ETH issuance by 90 percent, but these changes won’t directly impact bitcoin. In fact, an Ethereum Proof-of-Stake is likely to expose Bitcoin’s reliance on an energy-intensive Proof-of-Work consensus mechanism, which Elon Musk and several large institutional players have highlighted as a point of concern in 2021. Bitcoin has been losing ground to Ethereum in recent weeks, leading the second crypto’s biggest supporters to call for a “flippening” in which the market capitalization of Ethereum would surpass that of bitcoin.
The hopes of “flippening” could wait a while, however while Ethereum’s fundamentals have never looked stronger, ETH has rarely emerged unscathed from BTC’s biggest crashes in the past. With a bear market in the crypto for nearly a year and lingering macroeconomic fears such as interest rate hikes and the European energy crisis still scaring investors, it’s hard to see how the market can turn around to the upside in a sustainable way in the coming months. The latest collapse proves that even the biggest crypto event in years may not be enough to inspire confidence in the space’s ardent followers.