Market Wrap: Markets are trading lower. Despite the Merge of Ethereum’s Success
At one point, Ether was down more than 9% as traders decided to “sell the fact” following a nearly seamless Ethereum Merge.
The Ethereum Merge went off without a hitch early Thursday morning. It was one of the most anticipated and closely watched events in the history of digital assets.
At about 06:43 UTC, Ethereum switched from a proof-of-work consensus mechanism to a proof-of-stake consensus mechanism. The goal was to reduce both the amount of energy used and the supply of the native ether token.
Despite the success of the upgrade, the prices of BTC and ETH fell on Thursday, as did those of traditional financial markets.
- On above-average volume, Ether (ETH) fell 9%. Following the merger, the price fell slightly and continued to fall for the rest of the day. A more pronounced 6% drop occurred around 14:00 UTC as volume increased, but it does not appear to be Merge-related. As fears of potential problems were alleviated, implied volatility (IV) for ether fell sharply following the merge’s success.
- Bitcoin (BTC) fell 2% on light volume. On an hourly basis, BTC prices fell aggressively around 14:00 UTC. A look at traditional financial markets reveals similar declines.
A Calendar of Economic Events: Initial claims for the week ending September 10 were 213,000, down from 218,000 the previous week, which had been revised downward from 222,000. The number of jobless claims exceeded the analyst consensus of 225,000.
The number of continuing claims was 1.403,000, which was a little bit higher than the revised number from the week before, which was 1.401,000.
American equities: The Dow Jones Industrial Average (DJIA), the tech-heavy Nasdaq composite, and the S& P 500 all fell 0.6%, 1.4%, and 1.1%, respectively.
Commodities: Energy markets fell, with crude oil falling 3.8% and natural gas falling 9.2%, respectively. Gold, a safe-haven asset, fell 2%, while copper prices fell 1.3%.
On Thursday, the Dollar Index (DXY) fell 0.01%.
The CoinDesk Market Index (CMI), a broad market index used to track the performance of a basket of currencies, fell 4%.
Bitcoin (BTC) $19,823, a -0.4% drop.
$1,505, -5.6% Ether (ETH)
CoinDesk Market Index (CMI): $990, -1.9%
S & P; 500 daily close: 3,901.35 -1.10%
Gold: $1,674 per troy ounce -1.3 percent
Daily close ten-year Treasury yield: 3.46% +0.05
Despite a successful merge, ETH prices are falling. the fact that one of the most important events in cryptocurrency history went off without a hitch, Ether fell sharply on Thursday.
The price drop of nearly 9% does not appear to be related to the Merge’s impact (i.e., the increase in energy efficiency, the reduction in ether supply, etc). Instead, a “sell the fact” price move is likely to be in play as an “Ethereum Merge” trade unwinds.
Investors are likely to believe that the merge will have an impact on the long-term supply of ether and the efficiency of the blockchain itself, rather than acting as a short-term catalyst for price movement.
Overall, Thursday’s 9% drop is the fourth decline of more than 8% for ether in the last 30 days, with the largest drop occurring on Aug. 19 (12.89%). Every time before, trading volume has been higher than its 20-day moving average. The same is true today.
Technically, the hourly chart of ETH shows that prices began to recover after 14:00 UTC but then reversed after falling below $1,500.
According to on-chain data, ETH funding rates are still negative. Payments between buyers and sellers of futures contracts are represented by funding rates.
When interest rates are negative, it is likely that sellers are driving the market because they pay buyers (longs) a premium while remaining short. Funding rates are frequently used to gauge market sentiment.
As stated in the September 12 Market Wrap, funding rates have remained negative over the last 30 days, peaking directly ahead of the Merge. Funding rates are expected to begin to moderate in the near future as any concerns about an unsuccessful merger prove unfounded.
For the time being, the long-term premise that the transition to a proof-of-stake protocol will be a deflationary event has proven to be correct.
The supply of ether fell by about 30 ETH four minutes after the merge (06:47 UTC). The supply of ETH had decreased by approximately 254 ETH as of 18:20 UTC. As traders buy ether in order to buy a deflationary asset, their story is becoming more and more true.