Ethereum and other major cryptocurrencies plummeted after a few hours of stability after Thursday’s Ethereum Merge. Ethereum recently dipped below $1,500, down almost 10% in the last 24 hours, its most significant drop since the end of August. The second-largest cryptocurrency by market cap surpassed $2,000 earlier this month, mainly due to merger euphoria.
The technical overhaul that transformed the Ethereum blockchain into a more energy-efficient proof-of-work protocol has been seamless. Thursday’s crypto futures market data shows many investors liquidating their hedged positions in the following hours.
The trend shows that they are betting on the possible outcome of an event, such as a potential rebellion by cryptocurrency miners who want to continue working on PoW systems, by closing deals they have made in the previous month or weeks. Was Jon Campagna, head of trading and capital markets and partner at crypto investment firm CoinFund, wrote in an email to CoinDesk.
Campagna noted that Ether and other cryptocurrencies have recently tended to track stocks and risky assets vulnerable to more significant uncertainty.
“We are amid difficult macroeconomic factors that appear to be ongoing,” he wrote. “At this time, it is unclear whether this asset class will perform singularly enough to deviate significantly from equities.”
Did the Merge Affect Other Cryptocurrencies and Markets?
Bitcoin fell below $20,000 for the first time since 8th September, nearly 3% down from the previous day. The largest cryptocurrency by market value has lost popularity to Ethereum over the past few weeks. Other cryptocurrencies in the top 20 market cap have fallen too, with popular meme coins DOGE, SHIB, and ADA dropping more than 3% recently.
The stock market also struggled with the crash. Both the Nasdaq and S&P 500 were down by more than 1%. Dow Jones Industrial Average (DJIA) was down by about 0.5%. Investors remain skeptical amid signs of inflation. The US Federal Reserve also hiked its rates at its Federal Open Reserve meeting in less than a week. Monetary policy observers widely expect a third straight rate hike of 75 basis points despite a high probability of a 100-basis point hike.
Ethereum Merge Might Increase Demand for GPUs
There is a positive side to the Merge, despite the price crash. Ethereum’s move to proof-of-stake can present an exciting opportunity for investors. Famous GPU makers like NVIDIA and AMD had lost the market for the chips. However, The Merge increased the supply of the processors in the market. There is resale and buying.
Graphics processing unit (GPU) prices plummeted, and analyst firm Jon Pedy Research data shows that channel supply (distributors) is surging. Not a fan of cryptocurrency mining, Nvidia always takes things lightly. Nvidia’s chief financial officer, Colette Kress, said,
“The company has limited visibility into how much this impacts overall GPU demand. Decreasing cryptocurrency mining has led to an increase in gaming demand.”
It is impossible to quantify precisely how much it contributed to the reduction in presumably. These non-responses stem from her settlement with Nvidia’s Securities and Exchange Commission for failing to disclose that cryptocurrency mining contributed significantly to its 2018 earnings.
After the Ethereum Merge, however, there was an increase in GPUs in the market. Cloud computing companies and artificial intelligence companies are now buying. The supply will increase demand hence manufacturing more GPUs.