Ethereum: Merge bloodshed couldn’t deter these weak macro benefits
Ethereum, the largest altcoin, has fallen 25% in the past seven days. Clearly, the much-hyped merger narratives have failed to work their ‘expected’ appeal. Despite the fundamental change in its emission dynamics, the event resulted in a “sell the news” development in prices.
Now, the question is – from institutional reactions to retail, could things get worse for the second largest cryptocurrency?
writing on the wall
After years of anticipation, Ethereum has successfully submitted the merge, but the price of ETH has plummeted. The number two crypto lost 25% of its market value last week.
This has led many to believe that the incident has become a business that describes the “buy the rumor, sell the news” trigger.
Was the merger just another classic ‘news selling’ event? Graf yawned and screamed! Investors bought ETH when the merger date was announced earlier this year and sold it when the actual event occurred. So, reap the benefits.
In comparison, BTC is down just 5%. Thus, the overall crypto correction narrative did not hold much ground for ETH. In fact, the flagship token still finds it difficult to move on from the Terra fiasco that has severely hurt its price.
While ETH in smart contracts has been on an upward trend since 2020, the collapse of Terra in May halted this growth, a report noted.
As of May 9, when Terra collapsed, the total percentage of ETH in smart contracts reached 30%. Meanwhile, protocol revenues have declined due to a combination of a crypto bear market, volume growth in L2s, and upgrades to protocol contracts for gas efficiency.
Even the supply of ETH in smart contracts repeats the same scenario.
#ETH Smart Contracts are trending upward until the collapse of the Terra ecosystem.
ETH on smart contracts stood at 27% at the end of August, down 2% from June. pic.twitter.com/PbtJEh60zE
— Messari (@MessariCrypto) September 20, 2022
At the time of writing, Ethereum has moved below the $1.4k mark with a fresh 2% correction in 24 hours. However, some features remain intact despite the situation.
First, the massive change in daily ETH issuance. Data shows that the supply of new ETH to the market has decreased by over 90% compared to what it was during the PoW era.
As seen above, ETH issuance has dropped dramatically. This could have a beneficial price effect, considering the demand for cryptocurrencies stays the same or increases, going forward.