Fri, January 27, 2023

Will Ethereum face difficulties in 2023?

Ethereum

Will Ethereum face difficulties in 2023?

Based on the volume of the digital asset held by long-term investors. CryptoSlate’s examination of Glassnode data suggested that Ethereum (ETH) may be gradually evolving into a store of value.  Ethereum is gradually developing into a store of wealth first appeared on CryptoSlate.

Ethereum will be far worse off than Bitcoin by the end of 2022. While Bitcoin has plummeted by 64% in the past year, it has fallen by 69%. The long-awaited transition to PoS has merely brought about additional difficulties, which indicate that 2023 will be a difficult year for cryptocurrencies.

Technically speaking, the transition happened without a hitch: developers  reduced energy usage by a staggering 99.9%, and the blockchain’s “heart rate”  stabilized in precisely 12 seconds to construct a block.

However, the 13.3% increase in validators—or an additional 57,000—is a questionable success. This indicator typically signals a rise in the decentralization of the network. The converse was true for Ethereum due to the large entrance requirement of 32 ETH (about $38,000) for a node to be deployed autonomously. As a result, investors transferred their funds to Lido Finance’s aggregators and significant cryptocurrency exchanges.

A combined 57% of the market is held by Lido, Coinbase, Kraken, and Binance, with 56% of the global market held by the US. These bitcoin warning signs should raise concern.

Financial regulations

Financial regulators have already acknowledged the necessity for increased network supervision due to the US’s primacy in defining transactions. It is simpler to regulate and implement the game’s regulations when there are such a huge number of players present. For instance, this year the US Treasury Department’s OFAC division halted Tornado Cash, a virtual currency mixer. Censoring encapsulated  72% of Ethereum blocks.

However, if SEC Chairman Gary Gensler is successful in having Ethereum recognized as a security, things could become lot worse. On the day of the PoS changeover, it started to become clear that this was the case since staking gave users the chance to earn passive revenue.

There is still more. Launched in late 2020, the deposit contract to hire validators now holds 15.7 million ETH, worth $19 billion or 13% of the network’s total capitalization. Some investors actively stake coins, which prevents them from being repurchased at the higher price they originally paid.

The Shanghai hardfork, which takes occur in March 2023, will lift the restriction. A sell-off of ETH and a new decline may result from the release of a huge number of coins. And the unhappiness of some investors with the negative dynamics.

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