Can Ether Stay Warm in the Crypto Winter? 

In the first three months of this year, prices of popular crypto token Ether were held up by expectations of the long-awaited Merge, the name given to the process of converting the Ethereum blockchain from a proof-of-work system to a proof-of-stake system. “We are seeing funds rotate into Ethereum in preparation for the Merge”, said Noelle Acheson of Genesis Trading in April. Two big things that are supposed to happen after the changeover are a 99% reduction in Ethereum’s energy-consumption, and an improvement in the number of transactions the network can process per second, from 30 to 100,000.However, the transformation won’t be a straightforward one. “There’s never been, in the history of blockchain networks, a change on the scale of Ethereum’s transition from proof-of-work to proof-of-stake”, explains Chase Devens of Messari.

Future Ether prices, at least temporarily, may be determined by the network’s success in pulling off the transformation. When Ethereum’s Tim Beiko tweeted on April 11th that the Merge was to be postponed into the second half of the year, Ether proceeded to lose 8% within the next two weeks, dropping from $3,215 to $2,947. For the month up until the 26th, the token lost as much as 13%. “I don’t think they’re going to be able to pull it off”, suggests AydinKilic of Hive. TimBeiko, however, begs to differ. “The odds of it not happening this year are very low”, says Tim. If you have an interest in investing in Ether prices as CFDs, or any of the top cryptos, let’s go through some of the token’s recent price history and also try to assess the future impact of the Merge on trading prices.

April to July

From the token’s April 26th level of $2,844, it dropped further down to $2,000 by mid-May, bringing its total losses since November to a massive 60%. Cryptocurrencies were all suffering due to the risk-off sentiment that was triggered by US interest rate hikes and high inflation rates. Ether is “Oversold daily and oversold weekly and cannot rally”, explained John Roque of 22V Research in May. By June 13th, Ether was down another 30% in the space of the previous thirty days and technical analysis showed that further bearish trends could be expected. On June 18th, Ether sunk to the point of $880.70 but the next nine days took it on a 5.8% rally back to $1,279.06. Even though losses for the year still exceeded 60%, this was “perhaps unexpected stability”, in the opinion of Genesis Trading. 

When US crypto lender Celsius said it was going to freeze withdrawals in June, the shaken crypto confidence could be felt in Bitcoin and Ether prices. This was only a month after the Terra USD stablecoin went into collapse, dealing a severe blow to general crypto sentiment. On July 11th, Bitcoin lost 2.4% to find itself at $20,474, bringing the total sum of money that had left cryptocurrencies’ market value at $2 trillion since the end of 2021. “It’s very easy to be fearful right now, not only in crypto, but generally in the world”, said Jared Madfes of Tribe Capital.

Ether Mining

Overall, by June 2022, about $15 billion had been spent on the GPUs (Graphics Processing Units) that are needed to mine for Ether. The Merge, however, looks destined to put a quick end to all Ether mining, leaving miners without an occupation after putting large sums of money into their equipment. Even though knowledge of the Merge had been readily available for some time, people have been buying even more GPUs in recent months, due partially to discounts of over 50%offered on the machines.

One other major concern for network operators is that, when mining stops, the Ethereum hash rate will fall and security will be compromised on the blockchain. Indeed, after the changeover,it’s expected that miners’ equipment will be devoted to mining Dogecoin, Monero, and Litecoin, pushing up their own hash rates significantly, says Sam Doctor of Bitooda. According to Staked, Ether prices may be elevated in the coming two years because of a surge in the amount of the coin used for staking. 

Looking Forward

Those involved in CFD crypto tradinghave several things to watch out for in the next few weeks and months. For one thing, how Ether trading prices will respond before, during and in the aftermath of the merge, which is set for August. There’s also the anticipated government regulatory measures that’ve been circulating for the past few years. Finally, it remains to be seen whether the practical uses of the Ethereum network will be able to keep the token from freezing in the crypto winter that has gripped the market. Therefore, CFD crypto traders ought to keep a focus on all the news they can get in order to make more informed trading decisions.