Ethereum on rollercoaster ahead of Merge
Cryptocurrency bounces back after 10% fall the previous day
Ethereum bounced back from a drop of 10% on Thursday as uncertainty surrounding its imminent Merge continued to weigh on cryptocurrency market sentiment.
The world’s second-largest cryptocurrency dropped to $1,508 on Wednesday, but bounced back Thursday morning to £1,652.71, up 8.02%.
The bounce-back meant the cryptocurrency surged past the gains enjoyed in the week between 28 August and 5 September, in which Ethereum rose by 13% from $1,426 to $1,617.
Uncertainty continues to surround the Merge
The volatility reflects the fractious attitude of traders and investors to Ethereum’s shift from a proof-of-work system to a proof-of-stake system.
The former is a decentralised consensus mechanism that requires members to solve mathematical puzzles to verify transactions.
The latter is a consensus mechanism in which cryptocurrency holders validate block transactions based on the number of coins a validator has committed.
The Ethereum Foundation has stressed that the Merge will be more secure, enable better scaling solutions and reduce the cryptocurrency’s energy consumption by 99.5%.
Bellatrix upgrade paves the way for the final push
Wednesday’s sell-off may have come as a surprise to some given that Ethereum had just successfully completed the Bellatrix upgrade. A change to the Ethereum Virtual Machine, which hosts the network’s decentralised applications, Bellatrix was the final upgrade required before the Merge is completed.
The way is now paved for the Serenity upgrade, which will constitute the first phase of the Merge. Ethereum’s developers then hope to complete the Casper consensus protocol upgrade and Proof-of-Stake shift by September 15.
Despite such progress, Ethereum’s latest price wobbles could be attributed to traders and investors looking beyond the Merge to the longer term or an attempt to pre-empt a possible post-upgrade “rug pull”.
With reports that the US Federal Reserve could raise rates by 75 basis points, the wider cryptocurrency market suffered a 6% fall in total capitalisation to $937bn.