The Merge: A period when Ethereum goes from proof-of-work (POW) to proof-of-stake (POS). This is scheduled for September 14. Technically speaking, the Merge, according to Ethereum, “represents the combining of Ethereum’s existing execution layer (the Mainnet we now use) with its new proof-of-stake consensus layer, the Beacon Chain.”
Due to a significant corporate dump, inflation, and unheard-of market frictions, the crypto market has been in a terrible situation during the second quarter. But will market dynamics change as a result of the upcoming Merge?
Market Attitudes and Price Movements
The crypto market enjoyed a relatively seven months successive growth from 2021 until the first quarter of 2022. This unprecedented bull run was triggered by corporate players flooding into the game for a piece of the action.
Tesla, J.P. Morgan, Goldman Sachs, El Salvador, and many other prominent players piqued the interest of new investors, propelling the industry’s market cap to a staggering $2 trillion.
Tesla revealed its 1.5 billion bitcoin investment in February 2021, causing a major surge that saw bitcoin almost cap at $69,045 by November 10.
In May 2021, after Tesla revealed it was suspending vehicle purchases using Bitcoin, citing climate concerns, bitcoin retraced from its all-time high at that time.
One year later, in June 2022, Tesla announced that it had sold 75% of its Bitcoin holding for the second quarter, despite CEO Elon Musk’s tweet that Tesla would not sell its bitcoin holding.
Other Market Troubles
In May 2022, after Do Kwon’s experiment (against expert advice) with BTC and the Terra Network, Luna, Terra’s native token, became the first coin in the top 10 ranking to go to zero, weakening the market even more.
In June, Core Scientific Inc., one of Bitcoin’s top miners, sold 7,202 coins (79% of BTC on its balance sheet), the bulk of its bitcoin holdings.
Also in June, Coinbase struck and laid off 18% of its workforce. Many other companies followed.
High-interest rates, inflation, the war in Ukraine—everything was happening at once.
These announcements triggered a crypto winter that saw Bitcoin stagnate and fluctuate between $19,000 and $20,000 per coin.
Many leading projects and tokens in the first 10 rankings also took a significant hit that left users wondering if the market would ever recover.
The unfortunate reality about the pre-Merge market structure is that most cryptocurrencies in the industry were disproportionately pegged to the volatility of Bitcoin. The consequence is that whatever affects Bitcoin also takes a heavy toll on other tokens. And bitcoin was notorious for its volatility.
Here is the summary of what happened to the market:
- Institutional investors sold their holdings
- Top crypto companies were liquidated
- Most miners sold their holdings and equipment.
- The massive firing of workers across sectors in the industry
- Repression of cryptocurrency mining in China
- The War in Ukraine
- At the same time, everything and everywhere
While some users are resigned to their fate in the belief that crypto is done, others are optimistic the market will return to its former green days.
Many key players, however, believe that this massive shake-off in the industry is necessary to purify it of leaches and bad actors so that the legitimate builders can ameliorate the sector.
But what happens now that the Ethereum merge is coming?
The fact is that Bitcoin’s price movements partly drive the crypto market. But over time, a shift in the discussion is happening. And these discussions reopened the long-aged rivalry between Bitcoin maximalists and Ethereum supporters.
But between the two giant blocks, the singular question remains: which blockchain or ecosystem will offer more value in the future?
Of course, the answer can be subjective depending on who is answering it. But at the far end of objectivity, it boils down to the question of use cases.
Ethereum and the Market Post Merge
Countless reports suggest investors are acquiring and tilting towards Ethereum, maybe as a result of the merge, or for whatever reasons. But what happens if these interests in Ethereum survive post-Merge?
If Ethereum can deliver on the expectations many users have of the merge, then there are possibilities that it may lead to a subsequent chain of events that will correct the market. There are also possibilities of creating an entirely new market demand pattern.
The obvious movement, however, is that since the merge announcement, the market is no longer looking grim. This is not to say that token prices have soared or recovered; on the contrary, rather, there is an optimistic climate that suggests we are headed for stability. And the Merge is leading this optimism.
No one knows how far the merge will drive the market and how POS will impact the entire Ethereum ecosystem. But one thing is certain: the market will move, but this time along Ethereum’s trajectory.
What if it drags Bitcoin along with it? what if?
As for Flipening, who knows? it’s a forked reality. The battle will keep raging on.