There has been a greater decline in the price of ether, as compared to bitcoin since its underlying technology underwent a massive upgrade that was referred to as ‘The Merge’.
Ethereum refers to the blockchain technology used by developers for building apps, while the native token that runs on it is called Ether.
The merge
The Ethereum network underwent the upgrade called ‘The Merge’ in which the transaction validation mechanism was changed.
It had previously been a proof-of-work (PoW) mechanism but was changed to proof-of-stake (PoS). According to proponents, this switch will make transaction validations on the network more energy efficient.
Therefore, the crypto community had been anticipating the upgrade for quite a while. The upgrade took place successfully, but since then, ether has experienced a bigger loss in value than bitcoin.
The merge was completed on September 15th and since then, ether has lost almost 15% of its value. During the same period, bitcoin has come down by 3%.
Before the network upgrade happened, ether had seen its price double from the lows it had hit this year in June, which saw it outpace the gains recorded in bitcoin.
The experts
Market analysts said that it was likely that the merge had already been priced in where ether was concerned and the movements were just about the news.
Furthermore, they also asserted that a number of traders have decided to shift their investments from the ether as well as other alternative cryptocurrencies and back into bitcoin.
This is because it is expected that bitcoin is going to outperform the rest of the cryptocurrencies in a couple of months.
Apart from that, investors have also become concerned about ether’s regulatory standing, which they think can change.
This comes after Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), said last week that cryptocurrencies operating on the PoS model are classified as securities.
This would mean that the crypto comes under the scrutiny of regulators. But, it should be noted that Gensler did not mention any names.
Rate hikes
Other than these factors, crypto investors have also been on edge because the US Federal Reserve is scheduled to announce yet another interest rate hike this week.
Global central banks have been hiking interest rates for addressing the stubborn inflation, but this has taken a toll on risk assets like stocks and crypto.
As cryptocurrencies are closely linked to US stock markets, particularly tech, they have also felt the heat with stocks under pressure.
US inflation numbers for August turned out to be higher than expected and this had hit both crypto and stocks.
There was a sell-off in the markets, but ether and other alternative coins had taken a harder hit than the rest because they are considered riskier than others.
Since June, Bitcoin’s value has been between $18,000 and $25,000 and investors appear to be buying in at this level.
It is expected that if Bitcoin falls below $18,000, it could go as low as $14,000.