It was one of the most anticipated events in the cryptocurrency segment for years. The famous 'The Merge' was a risky leap for the Ethereum network, but everything went well: the cryptocurrency was reborn, and it did so with obvious advantages. The good news, however, has not had the impact some might hope for: instead of encouraging a potential revaluation of its cryptocurrency ETH, what is happening is (once again) the opposite.
Wasn't this going to help ETH rise in value? That is certainly what many expected. We already explained that with The Merge the Ethereum network goes from using a PoW (Proof-of-Work) consensus mechanism to a PoS (Proof-of-Stake) one, and this has very important advantages, such as reducing the consumption of the network by 99.95%.
Now it looks more like an action ... SEC Chairman Gary Gensler indicated in comments to the Wall Street Journal how this change called for closer surveillance of financial institutions in the United States. Now the owners of ETH (the token of the Ethereum network) can ' stake ' and then collect profits.
...or a loan. This executive added that if an entity offers staking services to its clients, "that is very similar —with some label changes— to loans." As the WSJ reveals, companies offering crypto-lending products must register with the agency, and in fact, in February the SEC forced the BlockFi Lending exchange to pay $100 million for not doing so.
dividends _ In addition, according to his words, "the investing public is anticipating benefits based on the efforts of others", and that, according to him, could make the SEC consider it not as a bitcoin-like cryptocurrency, but as an action that gives dividends and profitability. As a value ("security") over the market. And that raises one thing: regulation. Why Is Ethereum Dropping?
Plummet. Those comments by Gensler have been, according to experts, the main reason for a notable drop in the value of ETH, which in the last seven days has gone from close to $1,750 to drop below $1,300 this morning. Now he's getting his breath back a bit, but investors seem to have received the news pessimistically.
Context. Actually, Gensler wasn't even talking about Ethereum in particular, but about cryptocurrencies based on PoS consensus mechanisms like this network. Bitcoin, which is based on the aforementioned PoW, should not have been affected, and yet it is also falling significantly in the same period it has gone from over $22,500 to below $18,500, although at this time it already exceeds $19,100.
BTC and ETH remain highly interrelated. The volatility is once again noticeable even in this currency, demonstrating once again that although the relationship between bitcoin and Ethereum is gradually diluted, what happens to one continues to determine the behavior of the other and vice versa.
There are other fears. The move to a Proof-of-Stake consensus mechanism may have been important on many levels, but some analysts point to a troublesome downside: being more vulnerable to censorship. The new structure may lead to greater centralization, they indicate, although in a certain way, the panorama has not changed much: before the big miners had more power, and now it is the big 'speakers' who will have it.
All unknowns. The truth is that the future of Ethereum is as unpredictable as it was before The Merge. There is now talk of how this leap could lead to greater institutional interest, but there are too many external factors influencing this market, and for both Ethereum and bitcoin and the rest of the cryptocurrencies questions about its real validity and practicality. —not so many as alternatives to fiat money anymore (at least for now), but as stores of value—continue to emerge.