Today is a big day for Ethereum. The blockchain network of the second (by market capitalization) cryptocurrency today switched from POW (Proof-Of-Work), after several years of preparation and rather hard work by developers, to POS (Proof-Of-Stake) mining mechanism.
This specifically means that 99.9% less electricity will be consumed for Ethereum mining from now on, which coincidentally coincided with a severe energy crisis in the world. It should be said that many other cryptocurrencies, NFTs and Web3 projects rely on the Ethereum network, so this so-called Merge directly affects them as well.
At the moment of the announcement that the Merge was successfully completed, the price of Ethereum, as well as other cryptocurrencies, rose slightly. Also, during the preparations in the last few months, Ethereum showed more “strength” than Bitcoin, which still works on the POS mechanism, and in certain situations acted as the market leader, taking over that role from Bitcoin.
Proof-Of-Work has recently been the target of criticism due to its extremely high energy consumption, that some countries have started to think about banning mining based on this mechanism, but there is still no consensus on this for now, given that this topic is largely measures subject to manipulation. There is a lot of misinformation in the media about how much electricity is consumed in mining, and we know that it is not difficult to spread it today.
In any case, this is a big day for Ethereum, but also for the entire crypto industry, but considering the current economic situation in the world, we should not expect any rapid growth in the prices of cryptocurrencies. On this occasion, let us remind you that since the beginning of this year, the crypto market has been closely linked to the securities market, which are currently in a bear market. Just two days ago, the largest drop in the Dow Jones, NASDAQ and S&P500 stock market indices since June 2020 was recorded. Consequently, cryptocurrencies followed suit.
The reason was the latest report on inflation in the US in August, which was above expectations, and this directly indicates that the US FED will raise interest rates by more than 0.75 percentage points in September, as was the case in the past months.
For the uninitiated, an increase in benchmark interest rates is introduced to curb inflation, but it has a bad effect on the capital market. Namely, it is more difficult for companies to borrow, which is why they invest less, which consequently leads to a recession. For now, we still do not know if cryptocurrencies have reached the bottom in this bear market, but we can say that they are holding around the 200WMA (200 Week Moving Average) value, which was the lower limit in previous bear markets, after which, as a rule, a new bull would follow Rune.