the central theses
- Regardless of the significance of the merger, crypto markets will be heavily weighed down by macroeconomic factors
- Some existing Proof-of-Work chains are seeing booming hashrates since Ethereum switched to Proof-of-Stake
The merger happened this morning — a milestone Ethereum co-founder Vitalik Buterin has been anticipating for eight years — but Ether’s price has remained subdued.
In fact, the price of ether fell by as much as 2% at the time of the transition. Since then, it has recovered slightly and is trading at $1,590, down 1% in the last 24 hours (as of 7:30 a.m. ET).
Bitcoin, which is now one of only two top 10 blockchains running on Proof-of-Work along with Dogecoin, saw a similar loss for its native cryptocurrency, leveling off around $20,150.
In fact, no top digital asset was green for the last day. However, Cosmos, a competing Layer 1 blockchain, has seen its native asset ATOM surge 10% in the minutes just after the merger, surging from $13.30 to as high as $14.64 this morning.
ATOM is currently the second-best performing top 50 digital asset over the past week, up 12%, just behind Yuga Labs’ ApeCoin, which was up 16%.
Such anti-climatic price moves could confuse some investors. Nonetheless, industry players remain optimistic about the long-term impact of the merger.
“The merger is far from being priced in. Recent price movements have been largely influenced by
external macroeconomic factors coupled with broader industry adjustments,” said Daniel Dizon, CEO of Ethereum staking protocol Swell Network, in an email to Blockworks.
Dizon expects the macro environment to normalize over time while the Ethereum ecosystem will continue to innovate and evolve. This, combined with structural changes in ether issuance, would be enough to attract more private and institutional capital, leading to upward pressure on prices, Dizon said.
He added that the move to proof-of-stake “has established Ethereum as the de facto blockchain for Web3 and beyond.” Future upgrades, particularly in terms of scalability, coupled with growing activity in the Layer 2 landscape, are likely to make it difficult for alternative Layer 1 providers to legitimately break into Ethereum’s market share in the medium to longer term.
Without Ether mining, other blockchains are seeing an increase in hash rate
The Ethereum blockchain is no longer mineable. Its original fork, Ethereum Classic (ETC), has seen its hash rate explode out of the merger, surging nearly 160% from 55 TH/s to 142 TH/s over the past day.
This makes the network more secure and less vulnerable to a 51 percent attack, which is vital as ETC has suffered from multiple attacks in the past.
Ethereum Classic’s hashrate (which measures the total computing power on the network) repeatedly hit all-time highs in the run-up to the merger, doubling between late July and early September.
In terms of magnitude, Ethereum finished its last full day of proof-of-work mining at more than 1,000 TH/s, while Dogecoin is currently clocking in at 542 TH/s, both of which eclipse ETC.
Crypto miners running high-performance GPUs are clearly striving to stay profitable with alternative networks. But that hasn’t suddenly resulted in a notable price move for Ethereum Classic’s native token, ETC, which is up 5% over the past day but just 2% over the past week – again, just noise.
Ethereum Classic’s hashrate had increased in the run-up to the merger. Source: CoinWarz
One explanation could be that hashrate alone does not bring any use. Ethereum Classic currently has few transactions in its mempool waiting to be mined — 9 in total at press time, compared to Ethereum’s 165,000. However, ETC is up more than 170% over the past two months, suggesting that speculation about future usage has been driving the price action rather than noticeable growth.
While Dogecoin and Litecoin did not see any major immediate hash rate increases, other proof-of-work chains saw their hash rate grow related to the merger. RavenCoin is up 80% today (10 TH/s to 18 TH/s), while Syscoin, a much smaller blockchain, is up 50% over the past week (39 EH/s to 58 EH/s).
RavenCoin’s eponymous native asset is up 75% over the past seven days, suggesting markets were expecting miners to flock to the chain – at least in the short term.
And so, these miners will no doubt be keeping an eye on Ethereum’s newest fork, ETHPow (ETHW), which is expected to officially go live sometime in the next 24 hours.
As expected, the price of the ether fork is volatile after the airdrop
Major mining pools have pledged to support ETHW, as have prominent community figures such as early ETC supporter Chandler Guo.
Meanwhile, crypto exchanges have started dumping ETHW to users who held ether at the time of the merger.
An FTX market for the token is already active – after briefly falling as much as 15% from $20 to $17, ETHW has since surged 75%, hitting a local top of $30 before trading at fell below $24 at the time of writing. However, that is less than 2% of the price of ether.
As of this writing, ETHW’s future seems in doubt, barring well-funded mining companies throwing in one last hurrah. It seems unreasonable to expect that the chain could compete with Ethereum and its cheery Layer 1 competitors, especially given that no major stablecoin or DeFi protocol has committed to operate on the network.
“Alternative Layer-1s — like Solana and Polkadot — still have a fair chance to innovate in the areas of consensus mechanisms, validator design, smart contract environment, peer-to-peer layers, and more,” said Chen Zhuling, CEO at Blockchain infrastructure provider RockX, called. “Many of these Layer-1s have also increasingly cultivated their developer communities and advocates.”
“The game is still on.”
Updated at 10:03am ET to add context to ETC price action.
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