Following the last week’s successful transition of Ethereum, the world’s second-largest blockchain, to Proof of Stake (PoS) from Poof of Work (PoW), its native currency ETH has witnessed a significant price drop.
Last week was a good week for Ethereum and projects built on it as it successfully transitioned to PoS, which promised many changes such as increased security and a significant reduction in energy consumption and CO2 emissions compared to the PoW system after 8 years of the development process.
Still, on Monday, September 19, 2022, ETH holders woke up to the token price at its lowest since July.
The price significantly dropped to slightly above $1300 from $1700 it managed to reach in September following the general negative trends in the crypto market. As the merge was expected to successfully fix various issues with the Ethereum blockchain attracting more investors, it is not unexpected for it to come with some consequences.
The decrease in ETH value may be due to proof of work miners selling off their ETH holdings to pay off their investors and partners as they are winding down their operations. The drop in ETH price may not be prevented even if Ethereum miners expand into bitcoin mining as the cost of bitcoin mining is high, and bitcoin payouts are falling sharply, which according to a Twitter user, could lead to another round of capitulation events.
Additionally, the price of ETH and other cryptocurrencies has fallen since the Federal Reserve announced its intention to implement a series of aggressive rate hikes in interest rates to battle inflation. The high-interest rates have greatly discouraged investors from making cryptocurrency investments.
Furthermore, Ethereum’s switch to PoS has not reduced the network’s congestion and high gas fees. Instead, it only laid the foundation for future infrastructure that might address its issues in the years to come.