The much-anticipated Merge upgrade for Ethereum will be released next week, but it may not be enough to stop Bitcoin and the rest of the crypto market from bleeding.
Bitcoin Causes Crypto Market Crash
Bitcoin and other top coins have seen a rough start to September, as is customary for the crypto industry.
BTC/USD. Source: CoinGecko
The leading cryptocurrency extended its losing skid by several weeks on Wednesday, falling below $19,000 for the first time since June’s crypto market liquidity crisis. According to CoinGecko, Bitcoin is trading at around $18,730 at press time, a daily decrease of 5.8%. It is presently 70% below its November 2021 peak.
Ethereum, BNB, Cardano, and Solano have been hammered even harder by Bitcoin’s most recent selloff, leading to a drop in the market value of all cryptocurrencies to below $1 trillion.
After the bankruptcy of Three Arrows Capital and subsequent failures of crypto lenders such as Celsius and Voyager Digital, the crypto market showed indications of revival throughout the summer. Ethereum and other assets soared more than 100% from their June lows, aided partly by decelerating inflation rates and generally cautious Federal Reserve actions.
However, the market’s positive momentum was questioned in mid-August when Bitcoin failed to surpass $25,000. In a speech at Jackson Hole on August 26, Fed chair Jerome Powell warned of future “pain” for markets and underlined that the U.S. central bank intends to get inflation down to 2%.
Can Merger save the Market?
September has historically been a terrible month for crypto values, and the market has extended its late summer decline over the last week. In recent weeks, traders have viewed the approaching Ethereum Merge to Proof-of-Stake as a potential trigger for a rebound, which might help Ethereum and associated assets like Lido and Ethereum Classic skyrocket.
As one of the momentous crypto events of the past several years, the Merge started with the successful activation of Ethereum’s Bellatrix upgrade. Despite Bitcoin’s decline, Ethereum and other assets have suffered significant losses. ETH is trading at $1,508 at press time, almost 69% below its all-time high.
There is still time for the Merge to revitalise the market, with Bitcoin accounting for about 36.5% of the overall crypto market capitalisation. However, crypto’s devout will be hoping that interest in the leading cryptocurrency rebounds as it did for Ethereum throughout the summer.
The Merge will increase Ethereum’s energy efficiency by 99.99% and reduce ETH issuance by 90%. However, the modifications will have no direct effect on Bitcoin. Proof-of-Stake Ethereum is expected to reveal Bitcoin’s dependency on an energy-intensive Proof-of-Work mechanism, an issue that Elon Musk and several big institutional players raised in 2021. In recent weeks, Bitcoin has lost momentum to Ethereum, prompting top Ethereum advocates to call for a “flipping” in which Ethereum’s market capitalisation surpasses Bitcoin’s.
Although Ethereum’s fundamentals have never appeared better, ETH has historically suffered significant losses during BTC’s worst price declines. The crypto market has been in a bear market for over a year. Investors continue to be alarmed by macroeconomic concerns such as interest rate rises and the European energy crisis. Thus, it isn’t easy to envision the market turning positive for an extended period in the coming months. Even the most prominent crypto event may not be enough to instil confidence in the space’s notoriously ardent believers, as demonstrated by the most recent selloff.