Crypto Santa Claus Rally This Christmas?

Traders often predict these two catalysts will drive crypto prices up or down in December. Is this a ‘Santa Claus rally‘ and tax loss harvesting?

The two terms are older than cryptocurrency, commonly discussed by stock traders at the end of each financial year. Just how accurate are they for making stocks or crypto price predictions?

Pentoshi On Crypto Prices Narratives

One of the most popular crypto Twitter accounts, @Pentosh1 told his followers to expect those two ‘narratives‘ in December.

Furthermore, he added Wall Street bonuses, as did many in the replies. Also not excluding the Chinese New Year as a 2023 narrative for crypto prices. Many holders around since the 2018 bear market will recall these ideas.

While he didn’t expand on that tweet thread yet this November, Pentoshi has been critical. He has been critical of this type of fundamental analysis in previous years. He says ‘just trade the charts’ and ‘what matters is the trend’.

Crypto Santa Claus Rally

Last Christmas for example, Pentoshi tweeted the image below and his comments that bad traders rely on narratives.

Investopedia explains the justification for a Santa Claus rally. It explains it as ‘general feeling of optimism and seasonal happiness on Wall Street, and the investing of holiday bonuses’.

The theory dates back to Yale Hirsch’s Stock Trader’s Almanac written in 1972. However thats not all thats happening this season of yuletide.

There is Tax harvesting. Tax loss harvesting is defined as selling assets to ‘limit the amount of taxes due on short-term capital gains. Gains which are generally taxed at a higher rate than long-term capital gains’.

Meanwhile, last December Pentoshi noted one narrative was that institutions would sell until the last business day of the month. Afterwards, the crypto markets would rally. However the Bitcoin price action was bearish at the 2021 close, with the overall macro downtrend being the deciding factor.

In July 2022 Pentoshi made an interesting prediction that more funds ‘will blow up.‘ This is the kind that focus on these type of crypto price narratives. Russian Oligarchs, Tax harvesting, etc. Most of these narratives came from the same VCs, TradFi guys. And funds that blew up or will blow up in a few months.

Bitcoin Prediction Following FTX Collapse

Earlier this month it emerged Sam Bankman-Fried’s Alameda Research were insolvent and lost $3.7 billion. The FTX exchange linked fund were previously imagined by many to be made up of expert traders and quants.

Heading into December, Bitcoin is trading sideways, stuck in a 2% range at the time of writing around $16,500.

Since hitting an all-time high of $69,000 on Binance, Bitcoin has crashed as low as $15,476. This is happening one year on. A 78% correction.

Well, here’s the  downside. Some analysts predict the $12-$14k level could be tested as support.

The 2019 high was $13,970. This was plotted on the Bitcoin price chart above, just above the 2018 yearly open of $13,715. Pentoshi is unsure if Bitcoin will see a capitulation event and crash that low.

He’s predicting more sideways accumulation, for an extended period of time – neither a Santa Claus rally nor tax loss selling. To the upside, some traders predict a bear market rally could take the Bitcoin price up. They predict that the coin will go as high as high as the 2021 lows for a bearish retest. The June 2021 monthly wick hit $28,805.

El Salvador To Place New Law To Pave Way For All Crypto 

El Salvador is doubling down on its bet on cryptocurrencies even in the midst of a bear market. The first country to declare Bitcoin as legal tender is now working on a Digital Asset Issuance Law. One which would facilitate operations with any crypto asset.

What The El Salvador Law Would Mean 

According to a document available on the official website of the country, the law would regulate the transfer operations of any digital asset. Especially digital assets seeking to “promote the efficient development of the digital asset market and protect the interests of acquirers.”

Furthermore, the novelty of the law is that it separates crypto assets from all other assets and financial products. This creates a tailor-made regulatory framework for them. The law leaves no room for doubt. Consequently, for a digital asset to fall under this categorization, it must use a distributed ledger or a similar technology. The blockchain is perhaps the most popular distributed ledger technology to date.

The law’s framework excludes transactions with CBDCs assets not eligible for trading or exchange. Assets with restricted transactions such as securities, and sovereign assets are regulated by foreign laws.

In a Twitter thread, cryptocurrency lawyer Ana Ojeda Caracas pointed out some of the most interesting features of the law:

  • Creation of a registry of digital providers.
  • Legalization of cryptos.
  • Inclusion of a legal definition of stablecoins and tokens.
  • Regulation of public offerings of digital assets.
  • Tax exemption in some cases.

Short Comings Of The El Salvadoran Law

Criticisms of the new law were not long in coming. Mario Gomez, a Salvadoran hacktivist, claimed that the new law was created as a way to benefit troubled foreign companies. Companies seeking to increase the attractiveness of El Salvador as a haven for the crypto industry. 

“The reason why these companies focus on small countries is simple. It is easier to sit directly with a president being a big company and implement measures that benefit (them),. This he assured in a Twitter space, analyzing the issue.

President Bukele introduced the famous Bitcoin Law in Congress in June 2021. A few hours later, it had already been approved by the National Assembly with large majority of the pro-government party. If this is anything to go by, the new law will likely come into force in a similarly hasty manner.

Crypto Companies To Eradicate User Data Monopoly

CoinSwitch is preparing to become the solution for the recent liquidity issues in centralized crypto exchanges. They intend to do this  by launching the CoinSwitch Pro.

Twitter is to improve its future and its currently laying its groundwork. Musk told employees that the company would encrypt DMs and would add encrypted video and voice calling between accounts. There have been uncovering of personal DM. So, Elon is to eradicate all traditional problems of the platform. Besides, after firing thousands of employees, Elon is re-hiring to fill up the empty slots.

AI-enabled cars are overshadowing the potential of expert human drivers by navigating through dense traffic conditions. Meanwhile, In a recently held experiment, experts deployed artificial intelligence in cars. The result was stunning. These specially equipped cars were able to ease rush hour congestion. Additionally, it also reduced driver frustration, and besides, less stop-and-go driving would also save more fuel and less pollution.

India’s largest telecom operator Reliance Jio announced the launch of Jio True 5G services in Pune, Maharashtra. Reportedly, Jio users in Pune will be at Jio Welcome Offer to experience Unlimited Data without any additional cost.

Celsius Customers Have Till January To File For Claims

The U.S. Bankruptcy Court of the Southern District of New York has approved a request by bankrupt crypto lender Celsius. A request to set a deadline for its customers to submit proofs of claim in the ongoing bankruptcy proceedings.

Celsius Bankruptcy Proceedings And Deadline

“The bankruptcy court approved our motion to set the bar date, which is the deadline for all customers. A deadline for all customers to make a claim. The bar date has been set for January 3, 2023,” Celsius wrote in a Twitter post Sunday.

According to Celsius, the firm’s claims agent Stretto is going to notify customers regarding the bar date. This notification will contain their next steps via email or physical mail for those customers with an address on file.

Additionally, customers should expect to receive a notification in the Celsius app. The court ruling also listed several categories for which customers will not need to submit a proof of claim. These include customers whose claims are not scheduled as “disputed,” “contingent,” or “unliquidated.”  It also includes cases where the claimant does not disagree with the amount, nature, and priority of the claim.

The Celsius fallout

Celsius became one of the first major crypto lenders to freeze user withdrawals. This followed the crypto market crash in June this year. Furthermore, after weeks of silence, the firm eventually filed for bankruptcy. This revelation revealed a $1.2 billion dollar hole in its balance sheet.

Celsius CEO Alex Mashinsky, who was allegedly responsible for a series of poor trades in early 2022, resigned in September. Mashinsky reportedly withdrew as much as $10 million from the company’s account in May. This happened several weeks before the firm halted withdrawals.

In September, the Vermont Department of Financial Regulation alleged that Celsius had been secretly insolvent since 2019. They also revealed that CEO Alex Mashinsky had made false and misleading statements to exaggerate the firm’s financial health.

Meanwhile, the firm is also facing allegations of running a Ponzi scheme. Judge Martin Glenn of the U.S. Bankruptcy Court is ordering the court-appointed examiner and the official committee of Celsius creditors to settle on who will lead a probe into the firm’s use of customer money. 

At the time, Greg Pesce, the creditors committee’s lawyer, gave a statement to the Wall Street Journal. The statement goes thus; “We don’t know if Celsius was a Ponzi scheme, but there are flags that came up.” He went further to add that the probe was “looking into whether it is.”

The broadened scope of the probe into Celsius’ operations now also includes the company’s marketing practices. It also includes representations it made to onboard new customers, as well as its handling of the platform’s native token. The next hearing in the Celsius case is scheduled for December 5.

Meanwhile, FTX Is Owing $3 Billion To A Few Of Its Biggest Creditors

Cryptocurrency exchange FTX said it owes $3.1 billion to its top 50 creditors. This information is according to documents filed Saturday in Delaware bankruptcy court.

Even though the filing did not disclose the names of the parties wrapped up in the swift demise of FTX, the document makes clear the scope of the potential losses its clients face. 

Consequently, FTX’s top ten creditors alone have more than $100 million each in unsecured claims, according to the filing. This figure equal to more than $1.45 billion combined. The filing explained that the debt does not involve anything owed to company insiders. It also explain that everything is subject to change as more information becomes available.

Crypto Hacking: FTX Chief Share A Solution To End It

Over the last few months, crypto hacking has turned rampant, especially in the decentralized finance (DeFi) market. This month itself, more than $750 million have been already lost in crypto hacks as per data from Chainalysis.

Rewarding Crypto Hackers?

Crypto billionaire and FTX chief Sam Bankman-Fried have recently outlined a framework to deal with this problem of crypto hacks. Interestingly, the solution proposed by SBF involves rewarding the hackers.

In his latest blog post, the FTX chief proposed a “5-5 standard” wherein the hackers get to keep 5% of the total funds stolen. Alternatively, they can also keep $5 million whichever is smaller. 

Other provisions include that the hacker acts in “good faith” and intends to cooperate on returning most of the crypto-assets.

In crypto hacking, some of the hackers are also white-hat hackers who seek to expose vulnerabilities. The hackers will do this in the protocol in return for a reward instead of making malicious gains. The SBF chief noted:

“Hacks are extremely destructive to the digital asset ecosystem. The 5-5 approach would have curbed the impact of hacks more than 98%.”

However, SBF is unsure of what would be the right standard for this process. The FTX chief also stated:

Keeping DeFi and peer to peer transfers free is crucial. There are policies I honestly think are key to achieving that. I could be wrong about those policies–I probably am wrong about some! But in the end the most important thing is to keep commerce and expression free.

As said, DeFi protocols have been the most vulnerable to hacks this year. So far in 2022, the DeFi protocols have lost a sum total of more than $4.4 billion.

FTX On Crypto Regulations

Sam Bankman-Fried also said that the U.S. arm of the crypto trading platform FTX will start conducting its own analysis. Their analysis will be on whether the crypto assets work as securities before listing them.

In the blog post, SBF said that FTX plans to use its internal framework for crypto securities. This they will do until there’s more clarity from the SEC. However, this internal framework doesn’t guarantee that FTX will be free from scrutiny by the U.S. SEC.

Meanwhile, Elon Musk Does Damage Control

The crypto market struggles due to a wide variety of macroeconomic factors. The altcoins market in particular faced a major crisis. Ethereum fell by 2% in the last 24 hours and is trading at $1281. 

Meanwhile, Cardano and Solana fell by 3% and 5% respectively. The Tesla earnings report was an important reason for the poor performance of the altcoins market.

Tesla missed its expected earnings for the third quarter and the company’s stock plummeted as a result. In the after-market, $TSLA is down by 6.25%. 

Tesla CEO Elon Musk informed investors that despite strong demand in the fourth quarter, the company will miss its vehicle delivery target in 2023.

Tesla was expected to earn over $22 billion in the third quarter. However, the company revealed that its third-quarter revenue was $21.45 billion. Tesla’s gross automotive margin also missed the estimates.

Why Tesla Earnings Impacts The Altcoin Market

The crypto market is strongly correlated to the broader general market. In particular, it shows a strong correlation between technology stocks and the tech-oriented NASDAQ. As major companies miss earnings estimates, the stock market plummets. As a result, the crypto market struggles too.

Moreover, Tesla’s earnings stoke fears of a slowdown in the economy and a potential recession. The World Bank believes that the economy will face a recession in 2023. Major figures such as Amazon founder Jeff Bezos believe that a recession is inevitable.

How Gitcoin Taps Community Voting

Despite the protracted crypto winter, Gitcoin continues to fund critical global projects for the public good. In March, according to Ukraine’s Ministry of Digital Transformation, Gitcoin Grants sent nearly $1 million in Ethereum donations. These donations were made to the Ukrainian government and NGOs operating in the region during the Russian invasion.

We need to almost reframe public goods,” Gitcoin fundraising and partnerships lead Azeem Khan said.

Gitcoin’s New World?

Gitcoin, Khan continued, imagines a world where Web3 allows people to own their financial transactions, search engines, and social media. A world that replaces private companies that use people as the product.

“For us to be able to do that, the infrastructure needs to be built,” he said. “So instead of thinking about clean air and libraries and things like that. It is also the roads, tunnels, and bridges of Web3 that will allow us to get to that place.” To do this, Gitcoin utilizes quadratic funding.

Quadratic funding was proposed in 2018 by Ethereum co-founder Vitalik Buterin and economists Zoë Hitzig and Glen Weyl. The idea promotes a democratic form of matching funding for public goods, services, or causes. With quadratic funding, any projects deemed valuable or worthwhile to a community receive funding through community voting.

The purpose of it is sort of an anti-whale mechanism,” Khan said. “In traditional worlds, when capital is allocated, it goes to a venture capitalist or an angel, but it’s usually a friend of a friend who ends up getting the money.”

Gitcoin And Quadratic Funding

Furthermore, Gitcoin does support global events like the cause of Ukraine. However, its primary focus is providing funding mechanisms for Web3. In June, during its 14th grant round or GR14, Gitcoin announced the launch of the Lootverse Round. This implies a $130k round funded by the Loot project to support projects in the Loot ecosystem.

Gitcoin recently completed its 15th grant round, raising over $1 million from 390,000 contributors.

As Khan explains, quadratic funding makes it possible to make sure funds go to the projects that need them most. It is not just a small group of projects headed by “friends” of the investors.

Web3 projects

“As much as people want to talk about inclusivity and diversity,” Khan continued. “The reality is the majority of capital ends up going to nepotism.”

Meanwhile, using the “it takes a village” way of funding, Gitcoin has prioritized underserved communities. This it has done by funding grants for projects led by or supporting women, youth-focused groups, marginalized communities, and people of color. 

Traditionally, these groups have less access to funding from banks and venture capitalists.

In addition, some of these projects include the Dream DAO. Dream DAO is a group that invests in web3 and social impact causes around the globe. 40Acres is like Dream DAO. It is a social DAO dedicated to creating self-sustaining communities of color using blockchain technology. 

Furthermore, 40acres also involves The Minority Programmers Association, an international network of developers that aims to build socially impactful software solutions. Not just building solutions, they also intend to spread Web3 education to marginalized communities.

It shows that being able to get the community out there voting with their dollars, on the things they find important, we found it quite successful,” he said.

In other news, Bitcoin is showing serious signs of recovery. Will the stable coin be able to climb back to its former glory? Only time will tell.

The Cryptocurrency Market Is Bracing For A Feds Tsunami

Bitcoin and cryptocurrency prices have crashed this year in the face of the Federal Reserve’s “brutal” interest rate hikes as it battles against soaring inflation.

The bitcoin price has plunged under $20,000 per bitcoin. This is down from almost $70,000 late last year. 

Meanwhile, ethereum and other top ten cryptocurrencies BNBBNB, XRPXRP, solana, cardano and dogecoin have also crashed. This is happening despite some game-changing developments such as The Merge‘.

The Reality Of The Cryptocurrency Market

Currently, following a stronger-than-expected U.S. jobs report this week, things are shaky. The report sent the bitcoin price sharply lower. 

Consequently, all eyes have turned to the latest consumer price index (CPI) report, due on Thursday. Some think it will “decide the fate of this market.”

CPI next week will decide the fate of this market,” one influential trading analyst posted to Twitter. He did this after data showed U.S. employers added 263,000 jobs in September. This was down from 315,000 in August but higher than an anticipated 255,000.

With this jobs report it seems clear we are on course for another significant hike from the Fed. I say this considering the market pricing in a 75 [basis point] rise in interest rates at its next meeting.” The above statement was by Paul Craig, portfolio manager at Quilter Investors, told Coindesk.

Consumer Price Index

September CPI is predicted to have slowed slightly from the month before, forecast to drop to 8.1% year-on-year. A larger-than-expected slow down in price rises could mean the Fed eases up on its program of interest rate hikes.

The last U.S. CPI reading of 8.3% showed prices were still climbing. Prices climbed despite the Fed embarking on a series of historic interest rate hikes this year. This led to torpedoing stock markets and cryptocurrency prices.

Worries are firing in from all fronts following the latest robust snapshot on the U.S. labour market.” The above comment was by Susannah Streeter, senior investment and markets analyst at brokerage Hargreaves Lansdown

Investors are simultaneously fretting that the fall in the pace of hirings indicates a slowing economy. However, also that the better than expected data shows that the jobs market hasn’t slowed enough to stop the Fed. Especially from hiking rates aggressively.”

Cryptocurrency Losses So Far

The bitcoin and crypto market, after touching $3 trillion last year, has lost a staggering $2 trillion. This happened in under 12 months in what’s been branded the latest crypto winter. 

The crypto market has previously spun on cycles of boom and bust with the last crypto winter lasting through 2018 until late 2020. 

This week, one crypto founder predicted how long this latest crypto winter could last.

We will need to see some consistent economic slowing figures before the Fed-pivot trade is realistically in play.” The above statement by William Marsters, senior sales trader at Saxo, said in an emailed note. “CPI numbers and FOMC minutes are out next week which will continue to build the picture for the outlook.”

Expectations had built this week. Expectations that the Federal Reserve could be about to swing dovish in its flight against inflation. Especially with one closely-watched analyst predicting the price of bitcoin, it could be about to “outperform most major assets.”

However, Minneapolis Fed president Neel Kashkari said this week that the central bank has “more work to do.”

Until I see some evidence that underlying inflation has solidly peaked. Until there are signs of it heading back down, I’m not ready to declare a pause,” Kashkari said.

Bitcoin And Ethereum Could Be Poised For Recovery

The bitcoin price has been bouncing around $20,000 per bitcoin since mid-June (despite some eye-popping bitcoin price predictions). However, ethereum has fallen sharply in the aftermath of its long-awaited, energy-saving upgrade, flying in the face of expectations.

Now, as Blackrock and Fidelity make surprise moves to enter the bitcoin and crypto market, a new finding surfaces. A survey of professional investors who collectively manage $2.2 trillion in assets has returned a huge crypto price prediction.

How Investors Are Taking This Bitcoin Price Action?

Institutional investors and wealth managers were found to be optimistic about the future price of bitcoin and ethereum. Furthermore, 46% forecasting bitcoin will be worth $35,000 or more within six months. However, 64% predict the price of ethereum will exceed $2,000 during the same period.

“Predicting future price movements in the cryptocurrency market is always a challenging endeavor. However, the survey clearly points to constructive price recovery expectations by institutional investors.” This was stated by Anatoly Crachilov, the chief executive of London-based crypto asset manager Nickel Digital.

Meanwhile, over half (58%) of respondents said they expect the crypto bear market to end within six months. This suggests a spring price rally.

“It is a well-grounded long-term optimism,” Crachilov added. “Investors acknowledge that the ongoing crypto winter still has some way to run but there is also a recognition that, if history is any guide, once the winter ends these high-beta markets will stage strong recovery.”

This Week on Bitcoin And ethereum

This week, as the stock market buckled under pressure from the Federal Reserve and fears rampant inflation could require an even stronger response.  Bitcoin, and other crypto prices climbed before falling back, with the bitcoin price dropping to just over $18,000.

“The $18,000 level has continued to provide decent support and if bitcoin doesn’t break down in the coming days, we could see upward movement in October with $24,000 and $26,000 being initial levels to watch,” Joe DiPasquale, the chief executive of bitcoin BitBull Capital, said in emailed comments.

After a sharp drop in the last few days, crypto tokens regained some flair. Top crypto tokens were moving in tandem with other riskier assets, rising higher on Thursday.

Whats Up With The Crypto Markets In Russia

Russia escalated its unprovoked invasion of Ukraine and the prospects of a severe global recession increased exponentially. Consequently Bitcoin, the largest cryptocurrency by market capitalization, was trading above $19,000.

Barring the US dollar-pegged USD Coin, all top crypto tokens were trading sharply higher on Thursday. BNB zoomed more than 5%, whereas Bitcoin, Solana and Ethereum rallied 4% each. XRP and Polygon were 3% up.

The global cryptocurrency market cap was trading significantly higher at $941.75 billion, jumping by 3% in the last 24-hours. However, the total trading volume tumbled over 12 per cent, close to $82.32 billion.

Expert take

This week, the global crypto market cap saw rapid changes with key cryptocurrencies including Bitcoin and Ethereum plummeting. The tokens dropped below their reserve prices but only to make corrections as spot volumes increased. According to Prashant Kumar, Founder & CEO, weTrade.

“Almost a fortnight after the Merge, Ethereum is trading at $1,300,” he added. “The strengthening US dollar, increased rate hikes and calls for broader regulations for stablecoins by the US Federal Reserve chair are all affecting the market.”

On the global scene, AQUA, a Web3 community platform for gamers, has launched its flagship marketplace for trading in-game assets. The startup also announced a $10 million investment from DIGITAL, an investment firm backed by Steve Cohen.

Cryptocurrency Prices Today: ETH And BTC Are Starting To Recover

Top Cryptocurrency gains today as bitcoin and Ethereum manage to show signs of recovery after days of serious slumps following the Merge. While bitcoin managed to climb above $19,000 mark on Thursday, Ethereum on the other hand saw a 24 hour gain of about 5%. Other altcoins which include the likes of Dogecoin, Litecoin and Solana were all in greens this morning.

Furthermore, Ripple emerged as the biggest gainer, with a 24-hour gain of 34.13%. At the time of writing this report, the global cryptocurrency market cap stood at $950.8 billion. Consequently, this marks a 4.73% gain in the last 24 hours, as per CoinMarketCap data.

Top Cryptocurrency Prices Today

Bitcoin price stood at $19,38.77, seeing a 24-hour gain at 3.34%. Meanwhile, ETH price stood at $1,339.17, marking a 24-hour gain of 5.70% at the time of writing. Dogecoin followed by registering a 24-hour gain of 6.66% as per CoinMarketCap data, currently priced at $0.0614.

Litecoin also saw som magic as the cryptocurrency saw a 24-hour gain of 4.51. At the time of writing, it was priced at $54.26. XRP price stood at $0.5328, seeing a 24-hour gain of 31.01%.

Furthermore, Solana price stood at $32.90, marking a 24-hour gain of 5.47%. Today’s price action saw the biggest gainers as Ripple (XRP) at 34.13% in 24hours. The best loser being Terra Classic, with a 4.93% gain in 24 hours.

What Cryptocurrency Exchanges Are Saying About The Current Price Action

Mudrex co-founder and CEO Edul Patel told ABP Live: “Bitcoin and Ethereum rose on Thursday after going through a roller coaster ride in the past few days. BTC managed to trade above $19,300 with the support of buyers. If BTC can close above $19,500 today, we might see an upward trend in the next week. But if it falls below the current level, we might see BTC going back to the $18,000 support. The second largest cryptocurrency, Ethereum, has also shown a bullish sentiment in line with BTC. This price action comes as a relief to the market participants after the successful Merge. If ETH can hold above the current level, we might soon see it reaching the $1,500 level.”

Sathvik Vishwanath, CEO and co-founder of Unocoin said, “Indian markets mainly reacted to the US central bank’s hawkish tone on interest rates, which created pessimism among investors. The Fed’s latest quarterly summary of policymakers’ projections shows that US central bankers expect to raise the key interest rate, now in a range of 3-3.25% after Wednesday’s 75 basis point increase, to 4.4% by the end of this year and to 4.6% until the end of this year. cryptocurrencies fended off declines triggered by the US Federal Reserve’s next big interest rate hike, although sentiment remained cautious given the central bank’s warning of economic pain ahead of policy tightening. Bitcoin had some positive price movement in the morning but ended with 1.5% negative by end of the day. Second-biggest coin Ether continued to underperform, falling 2% as well.”

WeTrade Founder Has His Say On The crypto Situation

WeTrade founder Prashant Kumar offered his take on the market scenario as well, “After days of movement in the red due to increased interest rates, the crypto market cap saw some positive movement with a 4% increase during Asia trading hours on Friday morning. Bitcoin caught up by 3.8% but is still trading below $20,000.”

Ethereum Crashes After A Successful Merge

The much awaited Ethereum Merge has come and gone. The aftermath of this event is still rather uncertain. However, it seems that the “Successful Merge” has produced some sort of reaction from the crypto society. It is not the reaction many were expecting. Ethereum is down by nearly 8% after the merge.

The second largest cryptocurrency in the world is now trading at $1,500 for the first time in more than a week. The plunge came from the merge, shifting from a more energy-intensive model  to a more eco-friendly one. 

What Exactly Is causing This Drop In Ethereum Prices?

The Ethereum merge went off without a hitch from a tech perspective. However, sentiment around ETH after the shift to a more environmentally-friendly consensus model might be dipping. Today, the price of ETH plummeted below the $1,500 mark for the first time in more than a week.

According to data from CoinGecko, ETH is down almost 8% over the last 24 hours to a current price of $1,485. That’s a sharper drop than the rest of the crypto market right now. According to CoinGecko it is down about 3% on the whole, with Bitcoin down about 2%.

Initially, the price of ETH had remained largely flat after the overnight merge, hovering around the $1,600 mark with slight fluctuations. However, shortly after 10AM ET this morning, the price sharply dipped from about $1,585 to its current mark. The move is not altogether unexpected.

In a report in early August, crypto analytics firm Glassnode flagged data on derivatives exchanges. One that indicated that the merge was shaping out to be a “sell the news” event. 

The hype around the merge appeared to be generating bullish sentiment around Ethereum in July. However, sophisticated derivatives traders were already hedging their bets. They did this expecting the price of ETH to drop after the event, according to Glassnode.

Ethereum’s Sell-The-News In play

“Traders appear to be utilizing call options to bet on the ETH price into September, whilst futures and options backwardation indicate an expectation to sell-the-news is in play,” Glassnode researchers wrote in a report at the time.

The merge is Ethereum developers’ name for the long-awaited shift away from the original proof-of-work consensus model. A model in which thousands upon of users run powerful computers to secure the network and also earn cryptocurrency rewards.

Under the new proof-of-stake model—in which validators stake (or hold) coins in the network to process transactions—the network is estimated to use over 99% less energy than before, according to the Ethereum Foundation.

While many Ethereum proponents were in favor of the merge, some ecosystem participants were less thrilled. For example, some have forked the previous version of the network to create the new EthereumPoW (ETHW) network. This will retain mining, while other miners have instead started mining coins like Ethereum Classic (ETC) or Ravencoin (RVN). 

The Current Price Of Cryptocurrencies Today 

Meanwhile, on the general cryptocurrency scene, bitcoin and other cryptocurrencies are strugging. 

“The current pressure on the crypto market is a result of a broader sell-off in the traditional markets. Especially as investors move away from high-risk assets to safeguard their wealth from economic shocks. The soaring cost of food and energy along with geo-political uncertainty will keep the investors on their toes in the coming weeks.” said Tarusha Mittal, COO and co-founder of UniFarm.

Bitcoin could not recover on the day as it continued to trade below the $20,500 markThis is a crucial point for the world’s largest cryptocurrency. Bitcoin price today was standing at $20,172.85, down by 0.37 per cent in the last 24 hours, according to data from CoinMarketCap.

Why The Merge Could Change The Future Of Cryptocurrency

The cryptocurrency community is abuzz about what could prove to be a landmark event. A major upgrade dubbed “the Merge” of the Ethereum blockchain. 

Crypto enthusiasts say the Merge will greatly reduce the environmental impact of cryptocurrency mining. It also enhances its utility as a way to conduct financial transactions. Amongst other uses. 

But what exactly is the Merge, and how it could change the future of crypto?

What is the Merge?

Ethereum, launched by Canadian computer programmer Vitalik Buterin in 2015, is a blockchain (or a digital ledger). 

It’s one of the world’s most used blockchains, second only to the bitcoin network. Think of the Merge as the next generation, or 2.0 version, of Ethereum. After nearly two years thinking about and testing a new way of conducting transactions, Ethereum developers say it’s finally ready for prime time. 

Put simply, the Merge aims to simplify the transaction steps on the Ethereum network. 

The change is called “The Merge” because, currently, there are several ways to create a new data block. Developers plan to combine those existing methods into a single process. One they say is both more secure and eco-friendly.

When Is It Going To Happen And Why Now?

The Merge is to take place on the 15th of this month (September).

The Merge is happening now because Ethereum is mature enough to handle financial payments. In addition, the network is also deemed fit enough to  store non-fungible tokens and trade crypto, said blockchain expert Merav Ozair.  

Ethereum can carry out 15 transactions per second in its current form, said Ozair. Ozair founder of startup company Blockchain Intelligence

However, if the Merge is successful, the blockchain could eventually handle up to 100,000 transactions per second. This is “way above and beyond what Visa and Mastercard can do,” she said. 

How Would The Merge Reduce Carbon Emissions In Cryptocurrency?

In a blockchain network, transactions aren’t verified by a bank, credit card company or other third party. 

Rather, it relies on a network of computers competing to solve complex problems in exchange for tokens. It takes thousands of computers to verify transactions on the Ethereum blockchain, a process known as “proof-of-work.” 

All of those powerful server computers chugging away together require vast amounts of power. 

The Ethereum blockchain uses about 112 terawatt-hours of electricity a year. That is roughly the same amount of energy used to power the Netherlands. That level of energy consumption releases about 53 metric tons of harmful carbon emissions into the environment annually. This is the same amount Singapore produces in a year.

The Merge replaces the proof-of-work system with an alternative approach called “proof-of-stake.” 

In that system, cryptocurrency owners known as “validators” verify transactions and record them on a new block. 

It is because proof-of-stake involves fewer people using their computers to verify transactions, fewer terawatt-hours are burned. 

Using proof-of-stake, the Merge is projected to reduce ethereum blockchain’s energy consumption by 99.9%, developers said. 

Will the Merge make it safer to use cryptocurrency?

Quite possibly. Since December 2020, Ethereum developers have been running essentially two different versions of the blockchain at the same time. 

The Beacon version was used so they could test the proof-of-stake system, while the Mainnet version carried on with business as usual using proof of work. But having both versions running gave hackers twice as many entry points to potentially attack Ethereum. 

After the Merge, the Mainnet version will disappear and financial transactions will only live on Beacon. Deleting one version of the chain, combined with having a small pool of validators, will reduce the odds of a hacker harming the blockchain, developers said.