As ether fell 9.1%, its lowest day since late August, the price stability that had been in place following Ethereum’s switch to a more energy-efficient “proof-of-stake” network abruptly vanished.
Thursday saw a significant drop in the price of ether (ETH), breaking a period of price stability that had been in place in the hours following the Merge, the historic transition of the Ethereum blockchain to a more energy-efficient “proof-of-stake” blockchain.
The second-largest cryptocurrency at the time of publication was down 9.1% to $1,489, marking its greatest daily fall since August 26. The largest cryptocurrency, bitcoin (BTC), was down only around 2% on the day. About 4% of the CoinDesk Market Index was lost.
According to Riyad Carey, a research analyst at the cryptocurrency analytics company Kaiko, the abrupt price drop appears to be a case of “buy the rumor, sell the fact.”
According to Carey, who provided this information to CoinDesk in writing, “there is still a lot of leverage in ETH markets, so volatility should be expected and will probably be appreciated by traders who saw the Merge go by without much of a move up or down.” The increase in spreads and decrease in market depth has also been seen; hence, bigger price changes are probable.
The “Ethereum Merge trade” is completed
Blockchain data revealed investors were moving ETH to cryptocurrency exchanges in large quantities, which is generally interpreted as an indication that holders are getting ready to dump, according to a previous investigation by CoinDesk. The $1.2 billion total inflow was the highest in the previous six months.
Most reports indicate that the Ethereum blockchain avoided significant technology blunders that may have caused a considerably more severe price drop.
Data from cryptocurrency futures markets reveals that many investors appear to have closed out hedged positions in the hours following the Merge, indicating that they are wrapping up trades they had made over the previous month or recent weeks to bet on potential outcomes of the event, such as the possibility of a revolt by cryptocurrency miners who want to continue using a “proof-of-work” system similar to Bitcoin’s, which Ethereum used until Wednesday.
Traders were selling out of contracts intended to profit from extreme volatility in the market for cryptocurrency options. In an ironic twist, that volatility is already here.
“ETH had a steep decline today after the Merge was declared successful, down from its peak of $2,000 one month ago. The market had anticipated a successful merger, and thus far, it appears that this has occurred “CoinShares research associate Marc Arjoon stated.
“I anticipate a lot of volatility since the degree of asymmetric information around the Merge generates several pockets of storylines. Investors should exercise caution as usual and anticipate price and narrative volatility “Added he.
Ether’s price increased by 4% in the two weeks leading up to the Merge, but it is still down 15.5% on a monthly basis, per market statistics.
Ethereum Classic was down 2% to $36.34 in the meanwhile.
The “Bankless” podcast cited Ethereum co-founder Vitalik Buterin as suggesting that the Merge “wasn’t going to be priced in pretty much until after it happened.” However, traders seemed to disagree.
“Many think that the Merge might make Ethereum more affordable or quicker. That is not the situation. The rhino. fi protocol’s founder and CEO, Will Harborne, told CoinDesk that there shouldn’t be any discernible differences between Ethereum before and after the Merge for developers or end users.
