Why is ethereum crashing

Adding Menon said, "after the successful completion of the Merge ETH prices fell on the "sell on the news" phenomenon; this was followed by a decline in prices of other cryptos. Since all the hoopla around the merge has abated. The short-term traders who bought ETH in the anticipation of positive momentum and to get the forked tokens have sold their positions after the event. This has led to a significant drop in prices.

The slump might be due to the soaring inflation, fear of recession, and anxiety around the Federal Open Market Committee's meet-up on the 21st of September over the next interest hike. US inflation came in higher-than-expected at 8. Last week, Ethereum finally upgraded to Merge. Many had expected the Merge's launch to spur the crypto market, however, experts believe the upgrade came at the wrong time when markets are not strong.

Over the weekend, Ethereum suffers its most severe downturn in the last six months. The cryptocurrency community is split, with some people concerned about a Terra LUNA downturn repeat. Ethereum has been in a death spiral for quite some time. Its market position has frightened investors. Furthermore, it has generated a major sell-off of the second-largest cryptocurrency.

But why is ethereum crashing? What factors have contributed to its fall?

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Anyone who hoped that Ethereum would look or run completely differently on Thursday would have been disappointed. Cryptocurrencies are heavily impacted by major market forces. While crypto was designed to hold value independent of the stock market, the two are still very much entwined. Over the last few years, tokens like Bitcoin and Ether have risen and fallen in correlation to larger market trends. This year, Ether prices have been depressed ever since the Federal Reserve announced its intention to institute a series of aggressive interest rate hikes in order to combat inflation.

High interest rates dissuade consumers from investing in more risky assets, which includes crypto. Ether, naturally, fell amidst the downturn. Investors worry about regulation. Is Ether a security? For years, Ethereum leaders have argued that the token is sufficiently decentralized, and regulators have mostly stayed away. The Fed is expected to raise rates by 50 to 75 basis points this week. Many brokerages believe that the central bank, in efforts to tame inflation, may even risk a recession.

Article continues below advertisement As the days of easy money are ending, risk assets have come under pressure. Penny stocks , loss-making tech stocks, and cryptocurrencies are plunging as investors sell off everything speculative. Ethereum developers have delayed a widely awaited network upgrade from a proof-of-work model to proof-of-stake. The shift is set to reduce the cryptocurrency's electricity consumption.

Article continues below advertisement This could be a rough weekend for crypto. Don't buy this dip. You'll lose a lot more money.

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The merge was designed to have a long-term impact, not a short-term one. This publication—and writer—were admittedly not immune to excitement. But while the developers of the merge promised many changes—including a sharp decrease in energy consumption and increased security—a short-term price increase was not one of them. Instead it merely laid the groundwork for further infrastructure that could solve its problems in the years to come. Anyone who hoped that Ethereum would look or run completely differently on Thursday would have been disappointed.

Cryptocurrencies are heavily impacted by major market forces. While crypto was designed to hold value independent of the stock market, the two are still very much entwined. Over the last few years, tokens like Bitcoin and Ether have risen and fallen in correlation to larger market trends. This year, Ether prices have been depressed ever since the Federal Reserve announced its intention to institute a series of aggressive interest rate hikes in order to combat inflation.

High interest rates dissuade consumers from investing in more risky assets, which includes crypto. The Fed is expected to raise rates by 50 to 75 basis points this week. Many brokerages believe that the central bank, in efforts to tame inflation, may even risk a recession. Article continues below advertisement As the days of easy money are ending, risk assets have come under pressure. Penny stocks , loss-making tech stocks, and cryptocurrencies are plunging as investors sell off everything speculative.

Ethereum developers have delayed a widely awaited network upgrade from a proof-of-work model to proof-of-stake. The shift is set to reduce the cryptocurrency's electricity consumption. Article continues below advertisement This could be a rough weekend for crypto. Don't buy this dip. You'll lose a lot more money.