Tue, January 31, 2023

Why Did Ethereum Sink 10% After Merge?

Bitcoin, ethereum, cryptocurrency

After successfully implementing its widely anticipated move to proof-of-stake, Ethereum led a slide in cryptocurrency markets on Friday. A stronger dollar and rising U.S. rate forecasts also played a role.

The second-largest cryptocurrency in the world fell 10% to $1,474.29, marking its lowest point this month. Ethereum lost all of the gains it had earned leading up to its shift away from proof-of-work. On Thursday, the integration went live, and there have been no problems. The decision to switch from mining to staking has significantly decreased the energy expenses associated with the Ethereum network. Also, should also assist the blockchain in expanding and enhancing transaction speeds ultimately.

Outlook on The Cryptocurrencies After the Merge

Additionally, ETHPoW, a hard fork of Ethereum endorsed by miners, suffered losses before becoming live. Solid U.S. economic statistics showed that the Fed would probably have enough room to hike interest rates further for the remaining of this year. Hence, larger cryptocurrency markets declined. Bitcoin is among the cryptocurrencies with the largest drop. Bitcoin dropped 2.5% to trade below $20,000. Meantime, the entire market value of all cryptocurrencies plummeted far below the $1 trillion threshold.

The greatest cause of crypto’s losses this year has been the increase in U.S. interest rates, with the industry losing about two-thirds of its market capitalization when the Fed started raising rates.

Investors were shocked by the rate increases after nearly two years of ultra-loose monetary policy, which produced enough liquidity to support cryptocurrency’s remarkable climb in 2021. But since the likelihood of a worldwide recession is continuously rising, it may be impossible to replicate such a surge soon.

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