Ether (ETH) drops 15% since Ethereum merge as traders take profits

Ethereum underwent a huge network upgrade called the merge which proponents say will make transactions much more energy efficient. Following the merge, ether prices have dropped following a huge run up ahead of the event.

Jakub Porzycki | Nurphoto | Getty Images

Ether has fallen more than bitcoin since the cryptocurrency’s underlying technology, the Ethereum network, underwent a huge upgrade called the merge.

Ethereum is a blockchain technology that effectively allows developers to build apps on top of it. Ether is the native cryptocurrency that runs on Ethereum.

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The merge is an upgrade to Ethereum that changes the validation mechanism for transactions from a proof-of-work method to proof-of-stake. Proponents say this will make validating transactions on Ethereum much more energy efficient and has been eagerly-anticipated by the crypto community.

Despite the upgrade happening successfully, ether has fallen more than bitcoin.

Since Sept. 15, the date the merge was completed, to around 4:30 a.m ET on Tuesday, ether is down around 15%. Bitcoin has dropped around 3% in the same period.

Ahead of the network upgrade, the price of ether roughly doubled from the lows of the year in June, far outpacing bitcoin’s gains.

Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that the merge was already “priced in” for ether and the “actual event was a ‘sell the news’ situation.”

Traders are also shifting investments from ether and other alternative digital coins back into bitcoin, according to Ayyar, “since the expectation is that Bitcoin will outperform for a few months from here on.”

What is the Ethereum merge?

Investors are also wondering whether the regulatory standing of ether may change after the merge after U.S. Securities and Exchange Commission Chair Gary Gensler indicated last week that cryptocurrencies that work on the proof-of-stake model, which applies to Ethereum, could be classed as a security. That would bring it under the purview of the regulators.

Gensler’s, whose comments were reported by several news outlets, did not name ether specifically. The proof-of-stake model involves investors “staking” or locking up their ether and earning returns for doing so.

“For Ethereum, there is another concern: PoS (proof-of-stake) crypto may fall under SEC’s scrutiny,” said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank.

Rate hikes still in focus