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Post Merge Ethereum Keeps Dropping – Is there a way to stop it?

After a rigorous eight-year development process, Ethereum, the second-largest blockchain in the world, successfully made the shift to Proof of Stake last week. However, when investors awoke on Monday, the token’s price had dropped to its lowest level since July. Ethereum has dropped more than 20% from its September high of almost $1700 to its current price of $1330.

Why is Ethereum’s value still falling since the merging was meant to solve many of its issues? Several causes of the present decline are discussed below.

A long-term, not short-term, impact was intended for the merger

When Ethereum successfully merged, many of the headlines that followed were positive: “Ethereum ‘merge’ will change crypto forever” said Fortune. (This writer and publication were, it must be said, not immune to enthusiasm.)

Although the merger’s creators made a number of promises, including a significant drop in energy use and greater security, one temporary price hike was not among them. Congestion and excessive costs on Ethereum were not resolved by the merger. Instead, it only prepared the way for other facilities to potentially solve its problems in the years to come. Whoever anticipated that Ethereum would operate or appear entirely different on Thursday was going to be disappointed.

Major market dynamics have a significant influence on cryptocurrencies

Cryptocurrencies and the stock market are still closely connected, even though they were designed to retain value independently. Over the past several years, cryptocurrency prices, such as Bitcoin and Ether, have fluctuated along with larger market trends.

Because the Federal Reserve stated its plan to implement a sequence of vigorous interest rate rises to battle inflation, Ether’s values have been down this year. High interest rates deter consumers from making investments in risky assets like cryptocurrencies.

Two days before the merger, on Tuesday, Consumer Price Index data revealed that the United States inflation rate is still persistently high. Interest rates will rise as inflation increases: In response, Jerome Powell, the chairman of the Federal Reserve, said that the government’s money supply must be controlled “forthrightly, aggressively.”

The Dow Jones Industrial Average lost more than 1,200 points as a result of the market’s reaction, making it the index’s worst day since June 2020. Ether inevitably decreased with the slump. This Wednesday is anticipated to bring the announcement of the Federal Reserve’s decision about a probable rise.

Regulators are a concern for investors

Ether: Is it a secure blockchain? That issue has been up for discussion since Ethereum’s beginnings. Ethereum’s creators hoped to avoid failing the Howey Test (the set of standards that decides whether something is secure) and so shield Ethereum from much greater governmental monitoring. Regulators have mostly refrained from intervening since Ethereum founders have maintained for years that the coin is adequately decentralized.

However, some experts who specialize in the crypto industry claim that there is still a long way to go before Ether is recognized as a security. Collins Belton, a well-known cryptocurrency attorney and general counsel of the law company Brookwood, asserts that “the arguments regarding a coin turning into a security are simply not that strong.”

Collins thinks that even though the SEC were successful in classifying Ether as a security, by its reasoning, they would also have to classify Proof of Work currencies like Bitcoin as securities.

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A 0.75 percent increase in the federal funds rate might be favorable for cryptocurrencies like Bitcoin

Investors continued to be concerned that the Federal Reserve would have to maintain its aggressive monetary policy in order to manage inflation, which may lead to an American recession, which contributed to the S&P 500 and Nasdaq Composite indexes posting their worst weekly performance since June.

It is anticipated that Bitcoin (BTC), which seems to have a significant association with both the S&P 500, would fall more than 9% in the previous week. Goldman Sachs analyst Sharon Bell cautioned that if this link remains, it might bring substantial damage to the cryptocurrency markets since aggressive rate hikes may produce a 26% decline in the S&P 500.

Contrary to popular belief, which holds that the Fed will raise charges by 75 percentage points during its forthcoming discussion in a meeting on September 20 and 21, the FedWatch Tool predicts an 18% chance of a 100-point rate reduction. Because of this uncertainty, short-term volatility may rise and keep investors on edge.

Investor interest in several cryptocurrencies may depend on how the Fed raises rates.

Although Bitcoin recovered from $19,320 last week and soared beyond $20,000, the bulls are having a hard time holding the current levels. This can be a sign of increased bear activity.

If the price continues to decline and drops below $19,320, the BTC/Tether (USDT) pairing might reach $18,510. It is expected that buyers would vehemently defend this level.

The simple moving average (SMA) of approx. $21,600 is an essential level to monitor on the upswing. If the bulls manage to raise the price beyond that mark, the pair might surge to $25,211. A recess and close beyond this resistance might signal the beginning of a new upswing.

Ethereum 2.0 is anticipated to lower the supply of ETH to stop price slumping

In comparison to its PoW model, Ethereum’s blockchain should become more scalable, usable, and energy-efficient after switching toward the PoS consensus mechanism. But how will the much-anticipated upgrade affect ETH prices?

Stakers will be required to start locking up their ETH coins in contracts to receive staking rewards from verifying transactions that now PoS has overtaken PoW as the resolution method, replacing miners. A validator must deposit at least 32 ETH upon this Beacon Chain, according to Ethereum.

According to research by the Swiss-based crypto-financial services business Bitcoin Suisse, staking will lower the amount of ETH in circulation. Nearly 13.7 million ETH has been claimed just on Beacon Chain as of August 29, 2022, taking over 11% of the total quantity out of circulation.

It should also be mentioned that the circulating quantity of the coin has already decreased as a result of an Ethereum improvement proposal (EIP) named EIP-1559, which introduced the burning of base gas fees in 2021.

Investors will view Ethereum’s advancement toward that deflationary monetary policy as an added benefit in addition to its position as the top platform for smart contracts. Additionally, by switching to PoS, Ethereum’s network will be less closely watched for its energy usage. After The Merge, Ethereum claims that its energy use would be decreased by “approximately 99.95%.”

Due to their high energy usage and carbon emissions, PoW networks like Bitcoin have been under pressure from European authorities to have their use restricted. According to the Harvard Business Review, the yearly energy usage of Bitcoin is comparable to that of Malaysia or Sweden.

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Uniswap Price Continues Bearish Spell, Can It Move Past $6?

Uniswap price is consistently travelling southward on the one-day chart. UNI’s bulls have not been able to break past its immediate support, causing traders to lose confidence. Over the last 24 hours, Uniswap lost 4% of its value. In the past week, UNI surged 4% on the one-day chart. The technical outlook of UNI remained::Listen

Uniswap price is consistently travelling southward on the one-day chart. UNI’s bulls have not been able to break past its immediate support, causing traders to lose confidence.

Over the last 24 hours, Uniswap lost 4% of its value. In the past week, UNI surged 4% on the one-day chart.

The technical outlook of UNI remained mixed with some signals pointing toward the bears taking over the market.

The coin’s current support zone was between $5.60 and $5.00, respectively. The bulls have constantly attempted to break past the $5.94 level.

This has caused buyers to leave the market as sellers have entered the one-day price chart. As Bitcoin struggles at $19,000, most altcoins also attempt to move past their immediate price ceilings.

If the Uniswap price continues to witness less demand, then over the next trading sessions the coin can attempt to touch the closest support line.

At the moment, UNI is trading extremely close to the local support line and if buying strength doesn’t pick up, the coin will fall below the immediate support line.

Uniswap Price Analysis: One Day Chart
Uniswap was priced at $5.69 on the one-day chart | Source: UNIUSD on TradingView

UNI was trading at $5.69 at the time of writing. The bulls have been defeated at the $5.94 resistance mark a couple of times.

Uniswap price can lose most of its gains if the coin continues to witness less demand. Overhead resistance stood at $5.94.

If UNI falls below that level, it will be reduced to $5.00. The amount of Uniswap traded in the last session fell, signalling that buying strength remained low. This indicated bearishness for UNI.

Technical Analysis
Uniswap registered low buying strength on the one-day chart | Source: UNIUSD on TradingView

UNI, for most of this month, traded in the selling zone. This is because the coin has been unable to topple over the immediate resistance mark.

This is because of the low demand for Uniswap at the time of writing. The Relative Strength Index was below the half-line, and that was a sign of increased selling strength over buying strength.

It also depicted bearishness on the one-day chart. The Uniswap price was below the 20-SMA line, an indication of less demand. It also means that the sellers are currently driving the price momentum in the market.

Uniswap continued to display buy signal on the one-day chart | Source: UNIUSD on TradingView

UNI’s technical indicators depicted mixed signals on the one-day chart. The Moving Average Convergence Divergence measures the price momentum and overall price action of the altcoin.

MACD underwent a bullish crossover and formed green signal bars. These green signal bars were buy signal for the coin.

This also could mean that, with increased demand, UNI might make a price comeback in the upcoming trading sessions.

Bollinger Bands portray price volatility and fluctuations. The bands had opened up, meaning that the coin was about to witness price volatility.

Featured Image From Somag News, Charts From Tradingview

Post Merge Ethereum Keeps Dropping – Is there a way to stop it?

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