Ether Price

Three crypto ETFs to be delisted in Australia as crypto winter continues

Two of the funds just received green lights for trading in the country in May, following regulatory approval.

The companies behind the Cosmos Purpose Ethereum Access ETF, Cosmos Purpose Bitcoin Access ETF, and Cosmos Global Digital Miners Access ETF filed a request to revoke their quotations on Cboe Australia, according to letters disclosed on Nov. 2. 

The decision to revoke the quotes reflects the crypto winter’s impact on demand for crypto assets, not the management teams’ belief in the space’s future, according to reports. Each of the three funds has a net asset value under $1 million.

On Oct. 31, Cosmos had requested that trading of its Bitcoin and Ether ETFs be halted. A trading halt was also requested separately by One Managed Investment Funds Limited for the digital miners ETF.

Two of the funds received green lights for trading in the country just in May, after getting regulatory approval, as reported by Cointelegraph. For the first Bitcoin ETF listing in Australia, Cosmos landed the minimum of four market participants to support the 42% margin requirements needed to cover risk. At the time, local players forecasted inflows up to $1 billion for the class of assets.

According to a recent report from CryptoCompare, the average daily trading volume of institutional crypto products had fallen 34.1% — to $61.3 million in October. The average daily volumes of almost all the products covered in the report decreased by -24.3% to -77.5% in the month.

October’s Bitcoin-based products recorded weekly net flows of $8.37 million on average, while short Bitcoin-based products saw the largest outflows, averaging $5.03 million, as per the report.

The downturn in prices has had an impact on other crypto exchange-traded funds. In October, Valkyrie Funds announced its plans to close the Valkyrie Balance Sheet Opportunities ETF, a crypto investment product offering indirect exposure to BTC.

The fund was delisted from the Nasdaq exchange on Oct. 31, with remaining investors receiving a cash distribution equal to the net asset value of the held shares. Valkyrie said the decision was part of an ongoing review of products as the firm aims to “best meet client demand.”

Happy Halloween: The five spookiest stories in crypto in 2022

This Halloween, we pay tribute to the crypto investors and businesses that fought through the various financial and technological nightmares that occurred in 2022.

After over 13 years of ups and downs, this year stands out for having the most turbulent bear market in the history of crypto. Owing to a mix of factors — that include regulatory clearances across the globe and improved credibility among projects that survived the bear market — the world of crypto marked numerous milestones this year. 

However, certain events in 2022 could raise goosebumps on the toughest diamond hands out there. Moreover, it was impressive to see crypto projects, in many cases helping each other, bounce back through an era of uncertainty.

Acknowledging the spookiest events this Halloween, we list the scariest events that shook the crypto ecosystem, leaving a significant impact on investors, businesses, entrepreneurs, miners and developers.

The key driver for the following list is widely attributed to the highly volatile time frame and geopolitical uncertainties, which saw the price fall across all sectors.

The extended crypto crash: Fear of the bears

The year 2022 inherited a turbulent crypto market, which started off slowly crashing in November 2021. As a result, immense fear and uncertainty gloomed across the crypto ecosystem right from the start of the year.

The bear market ate away more than $1 trillion from the crypto market — bringing down the overall market cap from over $2.5 trillion to under $1 trillion in a few months.

The 2022 crypto crash scared investors as it drained out profits from all sub-ecosystems, including Bitcoin (BTC), cryptocurrencies, nonfungible tokens (NFTs), and decentralized finance (DeFi), among others.

The loss was felt both ways. While the price depreciation translated to investors losing a part of their life savings, businesses were struggling to stay open amid massive sell-outs and a lack of investments.

The scary instability of algorithmic stablecoins

The Terra ecosystem collapse is widely considered to be the biggest financial catastrophe ever witnessed in crypto by a single entity, and rightfully so. The two in-house offerings from Terra Labs destabilized and almost instantaneously lost their market value. 

In the early days of the crash, Terra co-founder Do Kwon was found publicly discussing ways to help investors recoup losses. Binance CEO Changpeng Zhao suggested burning LUNC tokens to reduce the token’s total supply and improve its price performance.

Shortly after, as regulatory scrutiny started building up against Terra’s operations, Kwon decided to go incognito, with his exact whereabouts unknown.

Numerous entities — including disgruntled investors, South Korean authorities and a Singaporean lawsuit — are still in pursuit of Kwon, despite his comments to the contrary.

However, Kwon maintains that he’s not “on the run” and plans to come out with the truth in the near future. The whole incident highlighted the risks related to the peg mechanisms of algorithmic stablecoins. 

Similarly, stablecoin Acala USD (aUSD) lost its peg in August 2022 after a protocol exploit caused an erroneous minting of 3.022 billion aUSD. A subsequent decision to burn the tainted tokens was made in order to regain their dollar value. Given the numerous other examples of stablecoin crashes, draft legislation in the United States House of Representatives called to criminalize the creation or issuance of “endogenously collateralized stablecoins.”

Sweeping layoffs and job cuts 

The burden of losses was also shared by some crypto companies’ ex-employees. Prominent players including Robinhood, Bitpanda and OpenSea announced massive layoffs, owing to reasons that circle back to surviving the bear market.

On the other hand, crypto exchanges such as FTX and Binance showcased resilience to price volatility and continued their hiring spree to support the ongoing expansion drive.

Crypto organizations that chose to lay off employees did it to cut operational costs and wind down loss-making components.

More recently, it was found that over 700 tech startups have experienced layoffs this year, impacting at least 93,519 employees globally. However, the tech community — from both crypto and non-crypto sectors — has been found migrating into Web3.

Crypto hacks: Humans are the real monsters 

One of the more visible problems engulfing crypto such as hacks and scams just got bigger in 2022. Hackers drained out millions of dollars worth of crypto by exploiting vulnerabilities present in poorly vetted crypto projects.

A strategy that was widely opted by the hacked projects this year was to offer the hacker a pink slip for returning a part of the loot. In the case of Transit Swap, a decentralized exchange aggregator, the hacker agreed to return around 70% (roughly $16.2 million) of the stolen $23 million fund.

While some hackers chose to return a part of the funds in exchange for immunity against prosecution, other projects such as Kyber Network and Rari Fuze have not been successful in pursuing their respective hackers to return the stolen funds.

This year also was witness to a spike in the number of phishing attempts, where hackers managed to access social media accounts of prominent figures, such as the South Korean government’s YouTube channel, Indian Prime Minister Narendra Modi’s Twitter account, and PwC Venezuela’s Twitter account to shill fake giveaways to millions of followers.

Governments across the world consistently issued warnings against phishing attempts involving fraudulent apps and websites impersonating prominent crypto exchanges like Binance.

Resurrection overdue: NFTs, Web3 and the metaverse

Talks around nonfungible tokens (NFTs), Web3 and the metaverse took over the crypto ecosystem by storm, promising virtual use cases that extend into the real world. Celebrities, actors, musicians and artists catalyzed adoption by using the budding technologies as tools to reconnect with fans or simply inflate their own wealth.

The NFT hype was officially declared dead in July 2022 when daily sales recorded yearly lows as investors that recently suffered losses refrained from stepping on the seemingly sinking ship.

Despite the nosedive statistics, the NFT ecosystem saw support from some of the biggest celebrities, which include musicians Snoop Dogg and Eminem, tennis legend Maria Sharapova and professional fighters Connor McGregor and Floyd Mayweather.

The decreasing interest in NFTs translated into a lack of investments in newer projects building use cases around Web3 and the metaverse. Meta, arguably the biggest contender in the metaverse, has plans to pump $10 billion every year into its project. However, an unclear roadmap and uncertain revenue streams plague the ecosystem from attaining mainstream acceptance.

Setting aside the fear, the biggest lesson that the spookiest events in the crypto showcase is the need to do independent research before making any investments. Past mistakes — such as investing in an unvetted project, trusting unknown sources and sharing private information over the web — will come back to haunt you.

This Halloween, Cointelegraph wishes you pumpkin spice and everything nice. Visit Cointelegraph to stay up-to-date with the most important developments in crypto.

What does the global energy crisis mean for crypto markets?

While miners stand to be significantly affected by the current power crisis, there is still some hope that the prevailing macro conditions could work in favor of the crypto industry.

There’s no denying that the world is currently facing an unprecedented energy crisis, one that has compounded severely in the aftermath of the COVID-19 pandemic so much so that countries across the globe — especially across Europe and North America — are witnessing severe shortages and steep spikes in the price of oil, gas and electricity.

Limited gas supplies, in particular, stemming from the ongoing Russia-Ukraine conflict, have caused the price of essential commodities like fertilizer to shoot up dramatically. Not only that, but it has also resulted in the heightened use of coal and other natural resources. Coal consumption within Europe alone surged by 14% last year and is expected to rise by another 17% by the end of 2022.

To expound on the matter further, it is worth noting that European gas prices are now about 10 times higher than their average level over the past decade, reaching a record high of approximately $335 per megawatt-hour during late August.

Similarly, the United States Energy Information Administration’s recently published winter fuel outlook for 2022 suggests that the average cost of fuel for Americans will increase by a whopping 28% as compared to last year, rising up to a staggering $931.

With such eye-opening data out in the open, it is worth delving into the question of how this ongoing energy shortage can potentially affect the crypto sector and whether its adverse effects will recede anytime soon.

The experts weigh in on the matter

Matthijs de Vries, founder and chief technical officer for AllianceBlock — a blockchain firm bridging the gap between decentralized finance (DeFi) and traditional finance — told Cointelegraph that the global economy is in bad shape thanks to a multitude of factors including the power crisis, looming recession, surging inflation and rising geopolitical tensions. He added:

“These issues are interlinked, primarily in the way that capital flows in and out of impactful industries. The worse the macroeconomic climate, the lower the capital (liquidity) that flows in and out of the digital asset industry. This liquidity is what enables the incentivization mechanisms of blockchain to continue working. So, for miners, if there is a shortage of liquidity, this means fewer transactions for them to confirm, lesser fees and decreased incentives.”

Moreover, de Vries believes that rising energy costs could provide additional incentives for miners to move toward the validator ecosystem of Ethereum 2.0 that relies on a far more energy-efficient proof-of-stake (PoS) mechanism.

Recent: The Madeira Bitcoin adoption experiment takes flight

A somewhat similar sentiment is echoed by Yuriy Snigur, CEO of Extrachain — an infrastructure provider for distributed applications, blockchains and decentralized autonomous organization (DAO) platforms — who believes that the ongoing energy price surge will impact proof-of-work (PoW) blockchains the most.

“They are the most dependent on the energy sector. In my opinion, the value of a blockchain should not come from the meaningless burning of energy, which is why PoW is doomed eventually,” he noted.

Worsening macroeconomic climate will hurt crypto in near term

Nero Jay, founder of the crypto YouTube channel Dapp Centre, told Cointelegraph that the challenges being witnessed will continue to have an overall negative impact on the crypto market, as a result of which most investors will continue to look at this yet nascent sector as being speculative and risky, at least for the foreseeable future.

However, as a silver lining, he noted that the aforementioned challenges could serve as an opportunity for increased crypto adoption, especially as many countries like Venezuela, Turkey, Argentina, Zimbabwe and Sudan continue to be ravaged by hyperinflation and sanctions, which may give crypto assets more utility and use cases.

Lastly, Jay believes that the worsening energy situation could result in increased scrutiny of the mining sector, especially since proponents of the zero carbon emission campaign will now have more fuel to criticize the space.

“Many are questioning the impact that crypto mining may have on the environment. The great news is we are already seeing many cryptocurrency projects, including Ethereum, that are making their blockchain platforms very efficient and low carbon emission based,” he said.

Bitcoin’s price and its relationship with the energy market 

From the outside looking in, increased energy prices will raise costs for miners, which in turn could force them to sell their held Bitcoin (BTC), thereby pushing down prices. Furthermore, heightened production can result in miners demanding higher prices to cover their daily operational costs and, in some cases, even forcing them to shut down their operations entirely or sell their equipment.

Also, even if miners continue to go out of business, the total volume of BTC being mined will remain the same. However, the block rewards will be distributed among fewer individuals. This suggests that miners who can stave off the bearish pressure induced by rising energy costs stand to make massive profits. Andrew Weiner, vice president for cryptocurrency exchange MEXC, told Cointelegraph:

“Electricity shortages can lead to higher electricity prices, raising the cost of Bitcoin mining substantially. In the event of a regional long-term power shortage, it will cause the migration of miners to other jurisdictions where relatively cheap electricity prices offer safety and stability.”

Hope still remains for a trend reversal

Weiner said that, while the energy crisis could put pressure on Bitcoin’s price, the poor lackluster state of the global economy could potentially counter this.

In Weiner’s view, the U.S. Federal Reserve’s monetary policy in the current global economic environment has had the most significant influence on the cryptocurrency market, adding:

“Beginning with the implementation of loose monetary policy by the Federal Reserve in 2020, institutions have digitally transformed their back-offices and accelerated their purchases of Bitcoin. When fiat depreciates, institutions adjust their strategy to allocate bitcoin as value-preserving assets.”

He further noted that the cryptocurrency market, especially Bitcoin, is becoming increasingly correlated with Nasdaq and the S&P 500, while its correlation with energy, oil and electricity will not be significant unless BTC mining becomes affected by a future global electricity shortage.

Moreover, the ongoing energy crisis can potentially trigger more government spending programs resulting the them “printing” more money to get themselves out of trouble. This can potentially result in a loss of confidence in fiat assets and more demand for digital currencies. This trend is not beyond the realm of possibilities since it is already being witnessed across several third-world nations and could even permeate into certain larger economies as well.

Recent: Ethereum at the center of centralization debate as SEC lays claim

Just a couple of months ago, inflation in the eurozone scaled up to an all-time high of 8.9%, a situation that was also witnessed in the United States, where inflation surged to a forty-year high of 8.5% back in August. And, while many individuals continue to be divided on the positive/negative impact of the stimulus packages on the global economy, the fear of increased inflation alone stands to raise the demand for cryptocurrencies.

Therefore, as we head into a future plagued by potential energy shortages and price surges, it will be interesting to see how the future of the digital asset market continues to play out, especially as rising geopolitical tensions and worsening market conditions continue to make matters worse.

Ethereum at the center of centralization debate as SEC lays claim

Ethereum’s transition to PoS was celebrated as a key upgrade. However, a month after the move, centralization concerns are mounting high.

Ethereum went through a key network upgrade on Sept. 15, shifting from its proof-of-work (PoW) mining consensus to a proof-of-stake (PoS) one. The key upgrade is dubbed the Merge. 

The Merge was slated as a critical change for the Ethereum network that would make it more energy efficient, with later improvements to scalability and decentralization to come.

A little over a month later, however, some industry observers fear the PoS transition has pushed Ethereum toward more centralization and higher regulatory scrutiny.

The Merge replaced the way transactions were verified on the Ethereum network. Instead of miners putting in their computational power to verify a transition, validators now pledge Ether (ETH) tokens to verify those transactions. The issue with this system is that validators with a higher number of Ether have a larger say, given they have a larger percentage of validator nodes or staked ETH.

To become a validator on the Ethereum network, one must stake a minimum of 32 ETH. Thus, whales and big crypto exchanges have staked millions of ETH to have a larger portion of the validator nodes.

Current staking activities look very centralized, with the leading liquid staking protocol Lido and leading centralized exchanges such as Coinbase, Kraken and Binance accounting for over 60% of the staked ETH.

RA Wilson, chief technology officer of crypto and carbon credits exchange 1GCX, told Cointelegraph that the Merge has enabled large holders of Ether to gain mass control of the network, making it significantly more centralized and certainly less secure and explained:

“Many ETH holders stake their crypto on centralized exchanges such as Coinbase, which allows these platforms to become dominant holders on the network, contributing to stakeholder centralization.”

The centralization aspect was quite evident right after the Merge, as 46.15% of the nodes for storing data, processing transactions and adding new blockchain blocks could be attributed to just two addresses.

Arcane Crypto analyst Vetle Lunde told Cointelegraph that while the PoS transition was important for Ethereum’s long-term goals of energy efficiency and scalability, one should be aware of the trade-offs:

“The largest validators being exchanges represent a potential long-term risk. Exchanges already find themselves in a difficult regulatory landscape, and precautionary rejections of transactions may conflict with one important core principle in the crypto ethos, censorship resistance.”

While Ethereum proponents claim that anyone with 32 ETH can become a validator, it is important to note that 32 ETH, or around $41,416, is not a small amount for a newbie or common trader, added to the fact that the lock-in period is quite long. 

Slava Demchuk, CEO of Web3 complaint platform PureFi, told Cointelegraph that the centralization and complexities involved in staking would make centralized entities like Coinbase more powerful:

“Most people will be staking with custodians (such as Coinbase) due to the simplicity and the fact that they don’t have 32ETH. This way, large companies will have a majority share of the network, making it more centralized. It means that entities with more ETH will have more control.”

The fear of regulatory scrutiny

Earlier in 2018, the SEC claimed that Ether is not a security, owing to its decentralized development and expansion over time. However, that may change with the move to PoS, which has complicated the relationship between the Ethereum blockchain and regulators.

Gary Gensler, Chair of the United States Securities and Exchange Commission (SEC), testified before the Senate Banking Committee on the day of the Merge, stating that revenue from “expectation of profit to be derived from the efforts of others” would include proof-of-stake digital assets.

Gensler also mentioned that staking from large centralized exchanges looks “very similar” to lending, calling out high-yield products that caused the recent crypto market meltdown and lumping these products into the financial instruments under the scrutiny of the SEC.

Furthermore, in an SEC lawsuit filed just a week after the Merge, the SEC claimed jurisdiction over the Ethereum network as the majority of nodes are concentrated in the United States.

While the SEC’s claims raised some eyebrows and with many criticizing the regulator for its approach, some believe Ethereum has had it coming, as Gensler has already stated that moving to PoS could trigger securities laws. Ruadhan, the lead developer of PoW-based mining token developer Seasonal Tokens, told Cointelegraph:

“The argument that many of the validators are located in the U.S. is weak because it’s not even a majority. However, this move does show an intent to regulate, and it would cause a major disruption to the economy if Ethereum were to be classified as a security. Centralized exchanges would need to de-list Ethereum. The world economy is currently very vulnerable, and Ethereum’s market cap is so large that an event like this could have spillover effects and even cause an economic crisis.”

Ruadhan predicted that if Ethereum was classified as a security, then it would be much more heavily regulated regardless of how centralized it is: “If there are very few block proposers, all concentrated in the United States, then they can be forced to censor transactions that violate U.S. sanctions, which would mean that Ethereum’s censorship resistance is lost.”

Kenneth Goodwin, director of regulatory and institutional affairs at Blockchain Intelligence Group, told Cointelegraph that the move to PoS has certainly provided the SEC with leverage to oversee validators and even the nodes themselves as long as they are connected with a U.S. person, entity or jurisdiction. However, there is an irony to the situation. Goodwin explained:

“The irony here is that this could be one of the networks in consideration for the U.S. central bank digital currency given its central nature of it. On the flip side, there would be more regulatory oversight that may include creating a system of registration for validators and Ether protocol-based projects. Nevertheless, it seems as though the SEC is seeking to classify Ethereum as a security.”

Jae Yang, CEO and co-founder of noncustodial crypto exchange Tacen, told Cointelegraph that centralization could become a concern for Ethereum if regulators move to impose Anti-Money Laundering (AML) regulations on staking. 

“Centralization will be a concern if the FinCEN or other regulators impose Know Your Customer, AML or other AML compliance requirements on users simply staking ether. Though a long shot at this point, there is a risk that centralized validators omit certain transactions, establishing themselves as the third-party intermediary on decision-making that goes against the very guiding principles of the decentralized financial system,” he explained.

Long-term impact of PoS transition

Despite concerns of over-centralization and regulatory scrutiny, industry observers are confident that the Ethereum blockchain will overcome these short-term issues and continue to play a key role in developing the ecosystem in the long term.

Okcoin chief operating officer Jason Lau advocated for an expanded view of the transition. He told Cointelegraph:

“When we think about the centralization vs decentralization debate, we need to look at the long-term. Open blockchains require a high level of decentralization to ensure censorship resistance, openness and security, so any shift towards more centralization would be worth keeping an eye on. The community is well aware of the importance of encouraging and ensuring a diverse set of participants, and we will see how this plays out over time.”

Wilson noted that the network may become slightly more decentralized over the course of the next 6–8 months, as lock-up periods on Ethereum begin to expire and holders will be able to withdraw their staked tokens.

And while node and validator centralization is a valid concern, Chen Zhuling, co-founder and CEO of noncustodial staking service provider RockX, noted PoW mining on Ethereum was as centralized as validators of the current PoS-based network.

Chen told Cointelegraph that in the PoW era, “Three mining pools dominated the Ethereum network’s hashrate. You could hardly compete with other miners to verify blocks if you didn’t possess an immense amount of computing power, requiring expensive, energy-guzzling mining rigs.”

Chen also advocated for a long-term view of the PoS transition as currently, tokens are mostly controlled by large foundations for the sake of security and on the goodwill assumption that they wouldn’t do anything to corrupt the network.

Demchuk was quick to point out that centralization in staking does not mean it will be easy for a large malicious group of stakers to potentially take control of the Ethereum network, as “there is an additional protective measure. ‘Bad’ validators will get slashed, meaning that their ‘stake’ can get confiscated.”

Ethereum might have transitioned to a PoS network, but a majority of scalability and other features will only arrive after the completion of the final phase, expected by the end of 2024.

Going ahead, it will be interesting to see how Ethereum overcomes the centralization of validators and addresses the growing regulatory concerns facing the network.

Apples and oranges? How the Ethereum Merge could affect Bitcoin

While the Ethereum Merge failed to move Bitcoin from a price standpoint, the industry believes we have yet to see the effects of its shift from PoW to PoS.

It’s been a month since Ethereum said goodbye to an essential feature its blockchain shared with Bitcoin (BTC). Called the Ethereum Merge, the long-hyped upgrade was widely celebrated, with the blockchain ecosystem. However, for the mainstream audience or even for the average trader, it felt more like a Star Wars Day celebrated by sci-fi geeks than an early Christmas.

As the Ethereum Merge occurred on Sept. 15, the most extensive blockchain ecosystem parted ways with the proof-of-work (PoW), the energy-hungry consensus mechanism that makes Bitcoin tick. The Ethereum blockchain now works on a more eco-friendly proof-of-stake (PoS) mechanism that doesn’t require any mining activities, leaving thousands of miners worldwide scratching their heads.

Price-wise, Bitcoin is yet to take a hit from the fundamental shift of its closest competitor. A whole month has passed since the Ethereum Merge, and the BTC price is still stuck between $18,000 and $20,000.

However, the overarching mainstream narrative of “Bitcoin should contribute to the world, not destroy it by depleting energy resources” is rekindled with Ethereum’s significant switch to a system that keeps blockchain alive with minimal resource consumption.

Ethereum avoided a dead end

Cointelegraph reached out to industry insiders to get a clearer picture of the Ethereum Merge’s impact on Bitcoin. 

“PoW was a dead end for Ethereum,” says Tansel Kaya, a lecturer at Kadir Has University and the CEO of blockchain developer Mindstone, “Because an Ethereum network that doesn’t scale can not live up to its promise.”

However, the Bitcoin community is not happy with the way its biggest price competitor took, according to Kaya. The BTC community often criticizes PoS for being vulnerable to censorship, he remarked, adding:

“If what [Bitcoin maximalists] say is true, Ethereum will either turn into a docile fintech network that is censored by governments, or a centralized structure like EOS, controlled by wealthy investors.”

Speaking to Cointelegraph, Gregory Rogers, CEO and founder of crypto-based gifting platform Graceful.io, noted that the Merge solidified the two distinct blockchains’ positions in the market. “Ethereum remains the transaction chain of choice with its increased speed and reduced fees,” Rogers said, adding, “Bitcoin is now the store of value of choice. They were already headed in this direction, but the Merge simply clarifies it.” 

Recent: What new EU sanctions mean for crypto exchanges and their Russian clients

From a price point, though, multichain marketplace UnicusOne founder and CEO Tashish Raisinghani believes that Bitcoin price will take a hit. “The crypto industry had a hard time because of macro-level challenges which resulted in the current bear market,” he said, adding that the Merge would make Ethereum more sustainable compared to Bitcoin, “Which hasn’t yet been able to recover from the Chinese mining crackdown in 2021.”

PoW is unrivaled in network security

Addressing the energy side of the argument, John Belizaire, CEO of eco-focused data center company Soluna Computing, told Cointelegraph that even though Ethereum’s switch to PoS could save energy, “It will also undermine the core decentralization aspect of cryptocurrency.” 

Although Bitcoin’s PoW consensus mechanism is energy-intensive, it is also fundamental to the blockchain and “is the best choice for any cryptocurrency that prioritizes network security.”

Co-locating flexible crypto mining centers with renewable energy plants can help stabilize the electric grid, solve renewables’ wasted energy issue, and provide an abundant source of cheap energy to crypto miners, Belizaire added.

The Merge united crypto miners

Bitmain also brought down the prices of Antminers, its flagship crypto mining units, to help miners get back into profits, he added:

Despite the Merge, Ether (ETH) miners won’t simply forgo PoW mining just because Ethereum Classic (ETC) is not minted via mining anymore, according to Anndy Lian, author of the book NFT: From Zero to Hero. Lian told Cointelegraph that the EthereumPoW (ETHW) project — the result of a hard fork after the Merge — is working hard and the miner community is more united than ever. 

“These various factors helped the miners offset their operating costs in this bear market, keeping them alive.” 

Joseph Bradley, the head of business development for Web3 service provider Heirloom, likened Bitcoin to “a global risk asset that is correlated to TradFi markets.” Bradley told Cointelegraph that, although Ether may be traded similarly, it still has neither the market depth nor the size that Bitcoin has. “Do we expect the world to become more or less chaotic in the coming years?” he asks rhetorically, answering: 

“Most people would lean towards more chaotic. Security will matter during this time. Bitcoin will become even more important. Expensive energy will create innovation with miners — They will most likely move toward positioning Bitcoin mining as an extension of the electrical grid itself.”

Bitcoin and Ethereum: “Apples and oranges”

Not everyone agrees that the Ethereum Merge will have an impact on Bitcoin, though. Martin Hiesboeck, head of research at crypto exchange Uphold, dismissed a direct comparison between Ethereum and Bitcoin as “apples and oranges.” 

Hiesboeck told Cointelegraph that Ethereum is basically a “company controlled by venture capitalists,” that’s why the transition to proof-of-stake aims to improve its economic and environmental credentials:

“Bitcoin doesn’t need to do that. Bitcoin is not a brand. Bitcoin is a computer network. Its output represents money. Nobody owns it. There is no brand. No CEO.” 

Khaleelulla Baig, the founder and CEO of crypto investment platform Koinbasket, supported Hiesboeck’s argument, telling Cointelegraph that the Merge won’t have any meaningful impact on Bitcoin as these assets serve different purposes. 

Recent: How decentralized exchanges have evolved and why it’s good for users

Bitcoin’s purpose is “to prove itself as a superior store of value to fiat currencies,” according to Baig. The PoW mechanism goes well with the purpose of Bitcoin, “As it helps the network maintain the scarcity of 21 million BTC via its difficulty adjustment rate,” he added.

Bitcoin as a PoW and Ethereum as a PoS network are making significant contributions to the crypto-asset ecosystem by competing with their best features. Tansel Kaya summarizes: “Having two distinct approaches rather than one is more suitable for the spirit of decentralization.”

Ether exchange netflow highlights behavioral pattern of ETH whales

The Ethereum netflow chart shows that the spike in exchange flows often comes when the price of ETH is trading at a short-term or long-term low.

The exchange netflow of Ether (ETH) over the past couple of years highlights a behavioral pattern among Ether whales that market analysts believe is done to pump the price of the second-largest cryptocurrency.

The “exchange netflow” is an indicator that measures the net amount of cryptocurrency entering or exiting the wallets of all centralized exchanges. The metric’s value is calculated by taking the difference between exchange inflows and exchange outflows.

Data shared by a pseudonymous trader at crypto analytic firm CryptoQuant indicates that ETH whales have consistently sent their holdings onto exchanges to raise the price of ETH and sell it at a higher market price.

The Ether exchange netflow data confirms the behavioral pattern among ETH whales and indicates it has been persistent since 2020. The price pump is often followed by whales selling their holdings at an increased market price, which itself preceeds a correction, as is visible in the chart below.

ETH price movement against exchange inflow. Source: CryptoQuant

The behavioral pattern comes as a surprise given that a positive netflow or a rise in the number of deposits on centralized exchanges is often viewed as a bearish signal, as traders mostly send their holdings onto exchanges to sell.

In their analysis, the trader noted that the exchange deposits increased periodically during short-term or long-term lows for the asset. The netflow chart confirms that the spike in exchange flows has often come at a time when the price of ETH has been trading at lower levels.

Related: Ethereum Merge spikes block creation with a faster average block time

Ether whales’ heavy deposits onto exchanges continued even in the run-up to the Merge as the price of ETH rallied prior to the key proof-of-stake transition. The price dipped after the Merge, despite numerous market pundits predicting it would perform otherwise, thus confirming the behavioral pattern associated with Ether whales’ exchange deposits. The trader concluded, however, that exchange inflow does not necessarily rise before Ether prices rise.

Ethereum post-Merge hard forks are here: Now what?

The Merge marks a turning point for the Ethereum network, but what are the consequences of switching to a new consensus mechanism?

On the first day after the Merge, the decentralized finance (DeFi) community is settling into the seemingly uneventful transition of the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS). However, it has yet to be seen the benefits that hard forks will bring to PoW supporters.

So far, the most important contending networks in favor of the mining community, EthereumPoW and Ethereum Classic, have shown different outcomes post-Merge.

A stumbling start

The fledgling EthereumPoW started its debut with Twitter users reporting issues with accessing the network. The issues were confirmed to be the result of a hack to the network but was reportedly resolved.

Major cryptocurrency exchange OKX has already started providing on-chain data for the new network. Though the current transaction activity of the crypto asset seems stable, the PoW spin-off’s price value has been in constant decay since its launch, going from a price of $137 at its peak to $5.87 at publishing time, according to CoinMarketCap.

Moving forward, there is no clear infrastructure or roadmap plan for the ETHPoW network. The project’s “meme” white paper, displayed on its website, is 10 pages long, with five of them solely dedicated to the title of the project and the remaining five “intentionally left blank.” The prank document is also accompanied by a GitHub repository with merely 16 contributions since August this year, and no further information is provided on the section of EthereumPoW official documents.

ETC’s revival

The cryptocurrency Ethereum Classic (ETC) could see a turnaround in its struggle to lift off, as the community could shift to the six-year-old project.

Originally created in 2016, the existence of Ethereum Classic is the result of one of the biggest philosophical divisions in the Ethereum community. The fork originated as a solution to the hack of The DAO, a project executing on the Ethereum network.

The DAO was an early iteration of a decentralized autonomous organization (DAO) on the Ethereum network. To address the hack and compensate investors, the community agreed to essentially roll back the network’s history to before the hack happened with a hard fork. While the new fork inherited the name “Ethereum,” those who disagreed with the move continued to support the old fork, which became known as Ethereum Classic.

Today, Ethereum Classic works as an open-source blockchain that runs smart contracts with its own cryptocurrency.

The preference for ETC over other fork options goes beyond its market price, already submitted to various ups and downs, but rather a matter of practicality. Sebastian Nill, ETC miner and chief operations officer of mining consulting company AETERNAM, told Cointelegraph that, since it runs using a PoW consensus protocol, it is more attractive for the mining community, adding:

“The possibility of a hardfork has always been there. People are always going to prefer to be able to mine Ether rather than having to buy it.”

As the network is a fork of Ethereum, meaning everything the main network had can be replicated on its hard fork, that doesn’t imply that the possibility of building products and services on top of the ETC’s chain would be the main interest for the community. 

The cryptoasset could also absorb most of the energy consumption left by Ethereum to apply on their own proof-of-work, allowing the network to confirm transactions and maintain its security with an important amount of energy resources.

“Ethereum Classic is going to be just as effective as Ethereum was for miners. In the end, the community is going to pick ETC, not because of its rentability but for effectiveness for data processing,” Nill says.

The user perspective

The users that decide to hold Ethereum PoW or any subsequent token post-Merge could find it difficult to trade their new assets. The support for operations with the fork-resulting asset from major exchanges like Binance is a current relief for holders who still face the asset’s decay in value.

Moreover, another concern that could be in sight is the one coming from the regulation front. In a recent commentary given to Wall Street Journal reporters on Thursday, the United States Securities and Exchange Commission chairman Gary Gensler reportedly said that cryptocurrencies and intermediaries that allowed staking could be defined as a security.

The regulatory attention toward Ethereum resulting from a PoW to PoS transition could be a game changer that effectively fits the U.S. law. This is due to the possibility of staked assets to generate dividends and be seen as securities according to the Howey test.

On the other hand, while Ethereum’s upcoming PoS model is more energy efficient and environmentally friendly, the upgrade hasn’t cured the current headaches for DeFi protocols and its users, like network congestion and high transaction fees, known as gas fees. For instance, the first nonfungible token (NFT) to be minted post-Merge cost over $60,000 in gas fees.

The building of strong foundations over providing lower gas fees and major transaction speed is a temporary tradeoff that won’t affect the market, as Matt Weller, global head of research of City Index, told Cointelegraph:

“From a user perspective, you want something that is cheap, fast and reliable. Through the Merge and more scaling in future plans for the Ethereum Foundation, this could be a foreseeable opportunity. They have worked from a very safe place, assuring security at all cost over other tradeoffs.” 

No shortcuts

Ethereum’s choice to bet on a change for its consensus protocol has been defended as a necessary, non-negotiable step. 

Skylar Weaver, devcon and devconnect lead of the Ethereum Foundation, told Cointelegraph that the Merge is a testament to the network’s “no shortcuts” approach to its development:

“No, I don’t think it is a trade-off. I see PoS as a necessary step to achieve those user-focused perks, like transaction speed and lower gas fees. Other chains achieve lower gas fees and faster transaction speeds indeed by making tradeoffs: They sacrifice decentralization to have more scalability. They take shortcuts.” 

Moreover, the usage of rollups through layer-2 networks will still allow access to Ethereum’s benefits for mainstream users.

“Ethereum is scaling right now via L2s. Specifically rollups. Folks can use Rollups today to have transactions with a fraction of the gas cost, faster, while still inheriting the security and decentralization benefits of Ethereum. That’s how we are scaling without taking shortcuts.” Weaver said.

Sharding could resolve Ethereum scalability trilemma, says researcher

Scalability trilemma implies that to scale, blockchains usually need to sacrifice one of their three fundamental cornerstones — security or decentralization, or transaction throughput.

After a successful Ethereum Merge, all eyes are set on the next phase of transition, which would introduce key scalability solutions on the platform, including sharding. Market experts believe sharding would be a game changer for the Ethereum network as it could potentially solve the scalability trilemma.

In an exclusive conversation with Cointelegraph, Uphold’s head of research, Dr. Martin Hiesboeck, explained how sharding could pave the way for Ethereum to become a truly global network.

Hiesboeck believes sharding could eventually solve the long-running scalability trilemma of blockchain networks. Scalability trilemma implies that to scale, blockchains usually need to sacrifice one of their three fundamental cornerstones — security or decentralization, with the third being scalability, itself. He explained:

“Sharding is indeed one of the most effective and universal ways to solve the so-called ‘scalability trilemma.’ Not sure it’s sufficient to proclaim it the only true scalability solution, but sharding is definitely among the best ones we have at the moment.”

In layman’s terms, sharding would introduce parallel processing, enabling the secure distribution of data storage requirements and making nodes easier to operate. In the current blockchain processing system, transactions are processed one block after the other. But with the introduction of sharding, the network can process multiple blocks of transactions concurrently.

Using this mechanism, validators that verify certain blocks will publish signatures attesting that they did so. Meanwhile, everyone else will have to only verify 10,000 such signatures instead of 100 full blocks, which is a significantly smaller amount of work.

Depiction of a Sharded Version of Ethereum. Source: Quantstamp.

Hiesboeck explained that sharding would not only increase Ethereum’s throughput by multifold but also lower the gas fees and make the network more energy efficient. He explained that the energy saving and scalability both come from “the smaller packets that have to be moved as sharding stores datasets in manageable blocks and allows additional requests to be executed at the same time.”

Earlier, Ethereum developers planned to launch 64 shards, which require roughly 8.4 million Ether (ETH) to be staked in Eth2. However, there are already nearly 13.8 million ETH staked by now, so the number of initial shards could potentially be even higher than that.

Related: Ethereum co-founder Vitalik Buterin defends DAOs against critics

The transition to PoS has also raised node centralization concerns, especially in the wake of the United States Securities and Exchange Commission’s (SEC) jurisdiction claims over ETH, since nearly 43% of nodes are clustered in the U.S. Hiesboeck said that the SEC’s assertions over Ethereum are misguided. He argued that the concentration of nodes can change overnight and explained:

“Ethereum nodes can pop up anywhere in the world, and while around nearly 43% of them are indeed centralized in the U.S. right now (the second-biggest country being Germany with 11.8%), this can change at a moment’s notice.”

Hiesboeck concluded by saying that the Ethereum developer community has a proven track record and has already demonstrated its resilience in the past so that anything can be solved, given time.

Ethereum miners dump 30K ETH, stonewalling ‘ultra sound money’ deflation narrative

Ethereum miners have sold over $40 million worth of ETH because of the Merge and plummeting revenue.

Ethereum’s switch to proof-of-stake (PoS) on Sept. 15 failed to extend Ether’s (ETH) upside momentum as ETH miners added sell pressure to the market. 

On the daily chart, ETH price declined from around $1,650 on Sept. 15 to around $1,350 on Sept. 20, an almost 16% drop. The ETH/USD pair dropped in sync with other top cryptocurrencies, including Bitcoin (BTC), amid worries about higher Federal Reserve rate hikes.

ETH/USD daily price chart. Source: TradingView

Ethereum remains inflationary

The Ether price drop on Sept. 15 also coincided with an increase in ETH supply, albeit not immediately post-Merge. 

Roughly 24 hours later, the supply change flipped positive once more, pouring cold water on the “ultra sound money” narrative due to a deflationary environment that some proponents expected post-Merge. 

Pre-Merge, Ethereum distributed around 13,000 ETH per day to its proof-of-stake (PoW) miners and about 1,600 ETH to its PoS validators. But the rewards to miners dropped after the Merge went live by roughly 90%.

Meanwhile, validators receiving Ether rewards now only make 10.6% of the previous amount. As a result, Ether’s annual emissions have dropped by around 0.5%, making ETH less inflationary, and perhaps even deflationary under certain circumstances.

Still, the Ether supply has been rising at an annual rate of 0.2% after the Merge, according to data provided by Ultrasound Money. 

Ether supply rate after the Merge. Source: Ultrasound.Money

The main reason behind the growing supply is lower transaction fees.

Notably, Ethereum made a change to its protocol in August 2021 that introduced a fee-burning mechanism. In other words, the network started removing a portion of the fee it charges for each transaction permanently. This system has burned 2.6 million ETH since going live.

Data shows that the Ethereum network’s gas fees must be around 15 Gwei to counterbalance the ETH rewarded to validators. But the fee was averaging around 14.3 Gwei on Sept. 20, meaning the ETH supply, on the whole, has been increasing.

Ethereum gas fees vs. supply. Source: Ultrasound.Money

Nonetheless, ETH’s issuance rate has decreased post-Merge, even though the supply rate remains positive with roughly 3,700 ETH minted post-Merge to date.

Miners add to ETH selling pressure

In addition, Ether’s price drop post-Merge comes after Ethereum miners’ mass exit from the ETH market.

Related: Does the Ethereum Merge offer a new destination for institutional investors?

Miners sold about 30,000 ETH (~$40.7 million) in the days leading up to the Ethereum’s PoS update, according to data provided by OKLink.

ETH miner address balance. Source: OKLink

Pseudonymous analyst “BakedEnt.eth” noted that the miners’ ETH selling-spree offset the impact of the slowdown in Ether’s issuance reduction.

“The Merge has been live for a couple of days, but many fail to see the impact of the 95% daily issuance reduction for a total of 49.000 $ETH in 4 days,” he wrote, adding:

“Miners have been selling relentlessly into this reduction and have dumped over 30.000 $ETH in the same timeframe.”

ETH’s price now risks dropping a further $750 in light of current macroeconomic headwinds, which are putting pressure on risk-on assets across the board.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Ethereum traders shorted ETH price in record numbers during the Merge — 50% crash ahead?

Ethereum traders are betting on a “sell-the-news” event on the day of the Merge as ETH exchange balance jumps.

Ethereum successfully completed its long-awaited transition to proof-of-stake via “the Merge” on Sept. 15, while traders have been increasingly shorting Ether (ETH) in anticipation of a sell-the-news event.  

Ethereum funding rate plumme

Ether’s futures funding rates across leading derivatives platforms dropped below zero—to their worst levels to date—before the Merge. The rate dropped to as low as -0.6% on BitMex. 

ETH funding rates history. Source: Coinglass

Funding rates are a percentage of the fee paid to either short or long position holders. The platform decides the fee based on the difference between the perpetual futures contract and the spot price.

Therefore, traders consider a market bullish when the funding rate is positive. Conversely, a negative funding rate hints at a bearish sentiment in the market. Let’s understand why with an example.

Currently, Ether’s funding rate average is around -0.1%. In other words, traders with a $1 million short ETH position are willing to pay those with long positions $1,000 every eight hours (based on when platforms recalculate the funding rates).

That shows traders’ conviction in a potential spot Ether price drop after the Merge.

However, a consistently negative funding rate also increases the possibility of a short squeeze. A short squeeze occurs when an asset moves higher and short traders decide to cover their position or get forced to do so via margin calls, thus adding more upside strength to the asset’s price.

ETH price technicals hints at 50% breakdown

From a technical perspective, Ether’s price risks dropping by 50% in the coming weeks due to the formation of a symmetrical triangle on its longer-timeframe chart. 

Notably, symmetrical triangles are trend continuation patterns, i.e., they typically prompt the price to continue in the direction of their previous trend after a consolidation period. So, Ether’s symmetrical triangle pattern appears bearish, particularly as it has formed after the token’s 80% decline from its November 2021 highs.

ETH/USD three-day price chart featuring ‘symmetrical triangle’ setup. Source: TradingView

Theoretically, a bearish symmetrical triangle’s downside target is calculated after subtracting the triangle’s maximum height from the breakdown point. That puts ETH’s profit target in 2022 around $850.

Capital rotation into Bitcoin

In addition to negative funding rates and the symmetrical triangle setup, Ether also faces downside risks from a renewed buying interest in Bitcoin (BTC), the leading cryptocurrency by market capitalization.

On the daily chart, ETH/BTC dropped to 0.078 BTC on Sept. 15, almost a week after topping out at 0.085 BTC. The pair’s correction came after a strong bull cycle, wherein its price rose by more than 75% in less than three months.

ETH/BTC daily price chart. Source: TradingView

“ETH’s underperformance ahead of the merge indicates that some traders attempt to front run a potential “sell-the-news” event,” noted Arcane Research in its weekly report, albeit adding:

“Whether or not the merge will turn out to be a “sell-the-news event remains to be seen.”

In another weekly report, investment management firm CoinShares reported a substantial decline in the capital of Bitcoin and Ethereum-based investment products.

Related: Analyst on $17.6K BTC price bottom: Bitcoin ‘not there yet’

However, Ether funds witnessed withdrawals worth $61.6 million in the week ending Sept. 9 compared to Bitcoin’s $13 million.

More sell-the-news cues come from a recent rise in Ethereum’s balance across all crypto exchanges. Notably, the Exchange inflow volume reached a one-month high of 22,723.289 ETH (7-day MA).

Ethereum balance on exchanges. Source: Glassnode

Traders typically increase their cryptocurrency deposits on exchanges when they want to sell their holdings. In other words, a rising ETH balance on exchanges increases downside risks.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.