Ethereum (ETH), the world's second-biggest cryptocurrency based on market volume, continued its freefall despite the “Merge”, a network upgrade. Its prices fell around 62 per cent from $3,769 a token early this year. The Ethereum community hoped its price might go up after the upgrade, but it tanked over 10 per cent, blamed on bad timing, as the US Consumer Price Index (CPI) dropped just two days before the merge, leading to broader crypto selloffs in the market.
The Merge's Long-Term Impact
Although the merge didn’t bring any price gains, it is expected to help boost Ethereum’s adoption. "There were a lot of concerns pertaining to the large-scale adoption of Bitcoin across corporate treasuries and other platforms and its consecutive impact on the environment.
“However, this has been refuted with the Proof of Stake launch of Ethereum on 15th September and there has been a drastic shift in the narrative as well.
“This plays very well for Ethereum as it is the only interest-bearing digital asset for a staker or a validator. Ushering in a new era of green cryptos and Blockchain, Ethereum’s transition to ‘Proof of Stake’ today presents a strong case for it to be included across corporate treasuries and other significant platforms," said Gaurav Dahake, CEO at Bitbns, a cryptocurrency exchange.
CPI Impact On ETH Prices
The US Bureau of Labor Statistics released the CPI Data on September 13, before the merge. US CPI, which measures the prices of a basket of consumer goods and services, fell by 0.2 per cent in August month-on-month. The August CPI stood at 8.3 per cent year-on-year, higher than 8.1 per cent estimated by economists earlier. It led to a sharp decline in crypto market capitalisation.
It was expected that the interest rate hikes would curb inflation, but on the contrary, prices rose in August. "At 8.3 percent, the rate was higher than estimated 8.1 per cent and the more sticky component (was) core inflation, which, too, beat estimates at 6.3 per cent. This shock on the upside, torpedoed prices across asset classes, including equities, gold and crypto," said Parth Chaturvedi, Crypto Ecosystem Lead at CoinSwitch.
FOMC Meeting
The Federal Open Market Committee (FOMC) is expected to meet on September 20-22 and is expected to decide on a possible rate hike to curb inflation after the August CPI data. "The bigger concern for the global economy is now around regional ‘unknowns’ like European gas crisis, Chinese real estate implosion and the Japanese Yen’s record depreciation," Chaturvedi added.
