Ethereum is plummeting because it already has more stock than hard cash

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It was one of the most anticipated events in the cryptocurrency segment for years. The famous ‘The Merge’ was a risky jump 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 that some might expect: instead of encouraging a potential appreciation of its ETH cryptocurrency, 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 have 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 that has very important advantages, such as reducing the consumption of the net at 99.95%.

Now it looks more like an action.. SEC Chairman Gary Gensler said in comments in the wall street journal how this change posed a closer surveillance of financial entities in the United States. Now owners of ETH (the Ethereum network token) 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 dollars for not doing it.

Dividends. Furthermore, in his words, “the investing public is anticipating profits based on the efforts of others”, and that, according to him, could cause the SEC to consider it not as a bitcoin-type cryptocurrency, but as a stock that gives dividends and profitability. As one more market value (“security”). And that raises one thing: regulation.

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Value of ETH in dollars in the last seven days. Source: CoinMarketCap.

plummeting. Those Gensler comments 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 touching $1,750 to falling below $1,300 this morning. He is now catching his breath a bit, but investors seem to have received the news pessimistically.

Context. Actually Gensler was not 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 also is falling dramatically and in the same period it has gone from exceeding 22,500 dollars to falling below 18,500 although at this time it is already over 19,100.

BTC and ETH are still very interrelated. Volatility is once again noticeable even in this currency, demonstrating once again that although the relationship between bitcoin and Ethereum gradually dissolves, what happens to one continues to mark 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 worrying downside: be more vulnerable to censorship. The new structure may lead to greater centralization, they indicate, although in a certain way the panorama has not changed too much: before the big miners had more power, and now it is the big ‘stakers’ 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 jump could give rise to a increased institutional interestbut there are too many external factors that influence this market, and both for Ethereum and for bitcoin and for the rest of the cryptocurrencies the questions about its real validity and its practicality —not so much anymore as alternatives to fiat money (at least for now) , but as stores of value—keep emerging.

It was one of the most anticipated events in the cryptocurrency segment for years. The famous ‘The Merge’ was a…

It was one of the most anticipated events in the cryptocurrency segment for years. The famous ‘The Merge’ was a…

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