Ether is going through a turbulent time ahead of its upcoming Ethereum blockchain update, dubbed The Merge.
The cryptocurrency market, which had been in a period of calm for two months after the last two crypto crashes, is once again turbulent. At the time of writing this article, the indicators are red for the two main cryptocurrencies in terms of capitalization, bitcoin (404 billion capitalization) and ether (189 billion capitalization) which respectively trade around 21,000 dollars and 1500 dollars.
According to data from Coinmarketcap, in the space of a week, bitcoin lost over 13% and ether lost over 18%. On Sunday alone, the price of Ether plunged from $1600 to $1500. How can this sharp decline be explained?
On the one hand, the fall of cryptocurrencies is the consequence of strong liquidations of long positions (when investors bet on a rise in prices) in bitcoins: 210 million dollars were liquidated this Friday as revealed by the media. The Block, causing the market to decline. As a reminder, the queen of cryptocurrencies – bitcoin – generally drags down ether and other cryptocurrencies.
Other indicators should also be taken into account. Indeed, the international economic context remains gloomy. Last week, the Federal Reserve announced that it should continue to raise its key rates in order to fight inflation, which is having a significant impact on traditional financial markets with investors looking to get rid of risky assets, such as bitcoin and ether which remain highly volatile assets.
Some analysts believe that the sharp drop in Ether may also be explained by the recent announcements of the Ethereum blockchain ahead of its upcoming merger called The Merge. Last week, the Ethereum Foundation indeed busted a myth about its upcoming merger, confirming that “gas” fees (commissions paid to miners to validate transactions) on ether will not be reduced (see our article at this topic). So, if so far The Merge has resulted in an increase in the price of ether (the price of ether so far rising much faster than the price of bitcoin), it would seem that the “bad” news from the foundation also have a negative impact on the price of ether.