Ethereum is falling because it already has more shares than cash

It was one of the most anticipated events in the cryptocurrency segment for years. The famous ‘Merge’ was a risky leap for the Ethereum network, but all went well: the cryptocurrency was reborn and it did so with obvious advantages. The good news, however, did not have the effect some had expected: instead of encouraging the potential appreciation of the ETH cryptocurrency, what happened (once again) was the opposite.

Wouldn’t this help ETH appreciate? It’s definitely what many have been waiting for. We have already explained with The Merge that the Ethereum network is moving from using a PoW (Proof-of-Work) consensus mechanism to a PoS (Proof-of-Stake) mechanism, which has very significant advantages such as reducing its consumption. network at 99.95%.

Now it looks more like an action.. SEC Chairman Gary Gensler noted in his comments in the Wall Street Journal that this change requires closer scrutiny of financial institutions in the United States. Now ETH holders (Ethereum network token) can stake and then collect profits.

…or credit. This executive said that if an organization offers staking services to its customers, “it’s very similar to loans with some tag changes.” As the WSJ explains, companies offering crypto loan products are required to register with the agency, and in fact, in February, the SEC forced BlockFi Lending to pay $100 million for failing to do so.

dividends. Additionally, in his words, “the investing public expects benefits based on the efforts of others,” and according to him, it could lead the SEC to view it as a money-making stock rather than a bitcoin-type cryptocurrency. dividends and profitability. As one more market cap (“security”). And that brings up one thing: editing.

The dollar value of ETH over the last seven days. Source: CoinMarketCap.

falling. According to experts, these comments by Gensler were the main reason for the notable drop in the value of ETH, which fell from about $ 1,750 to $ 1300 this morning over the past seven days. Investors seem to have taken the news pessimistically, even though it’s breathing a bit now.

Context. Actually, Gensler was talking about cryptocurrencies based on PoS consensus mechanisms like this network, not Ethereum specifically. Bitcoin based on the mentioned PoW should not have been affected and yet it is dropping significantly and has fallen below 18,500 while surpassing $22,500 despite already being above 19,100 in the same period.

BTC and ETH are still highly correlated. Even in this currency, volatility is evident once again, showing once again that although the relationship between bitcoin and Ethereum is slowly unraveling, what happens to one continues to determine the behavior of the other, and vice versa.

there are other fears. The move to the Proof-of-Stake consensus mechanism may be important on many levels, but some analysts point to a worrying downside: being more vulnerable to censorship. They point out that the new structure could lead to more centralization, but in a particular way the panorama hasn’t changed much: big miners used to have more power, and now it’s the big ‘stakeers’ who will have it.

all unknowns. The truth is that the future of Ethereum is not as predictable as it was before The Merge. There is now talk of how this jump could lead to more institutional attention, but there are too many external factors affecting this market and there are questions about its true validity and practicality for both Ethereum and bitcoin and the rest of the cryptocurrencies. They continue to emerge – rather as alternatives to fiat money (for now at least), but as stores of value.