It’s D-Day in the crypto world.
The highly anticipated update of the Ethereum platform – known as The Merge – finally arrived on September 15th after many years of speculation and preparation.
The change does not appear to have a significant impact on prices, however, the Ethereum blockchain local currency is down 7% to $1,473 at the last pick, according to data firm CoinGecko.
Ether is the second largest cryptocurrency by market capitalization after Bitcoin, which also dropped 2.7% to $1,633. Dogecoin price fell 2.6% to $0.059051.
The merger will change the transaction consensus mechanism in ethereum from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The Bitcoin ecosystem uses Proof of Work.
Winston Ma, managing partner of CloudTree Ventures, said Proof of Stake “replaces miners with validators, potentially significantly saving energy use.”
Ethereum should now consume much less power than before, according to the Ethereum Foundation, a group of developers that oversee the blockchain.
Arrival in time
“The merger arrives just in time because cryptocurrencies like ethereum and bitcoin are often criticized for the energy-intensive process of ‘mining’ to generate new coins. Just last week, the White House released a report warning that proof-of-work mining operations could That gets your way,” said Ma, author of “Blockchain and Web3: Building the Foundations of Cryptocurrency, Privacy, and Security in the Metaverse,” in efforts to mitigate climate change.
Ma noted that while the merger is faltering in light of the inflation reports, “in the long run, this is very important for institutional adoption of crypto assets, especially investors who are sensitive to environmental and social governance.”
“Despite this significant achievement, the crypto markets earlier in the week were spooked by the macro news that US inflation numbers continued to rise, slightly worse than expected,” said Billy Endres, cryptocurrency expert at Finder. ”
This led to simultaneous selling across Bitcoin, the S&P 500 and the NASDAQ on Tuesday, Andres said, with their charts nearly mirroring each other.
‘ETH is a victim too’
“ETH has been a victim as well, but has managed to recoup some of its losses, most likely thanks to the hype around the merger,” he said. “Futures data indicates that ETH traders were concerned about the consolidation. Binance Futures’ funding rates on Wednesday were -0.216%, nearly 100 times their average price.”
“This means that traders selling on ETH have been paying huge margins to keep their positions open prior to the consolidation, and are likely to head against any adverse scenarios,” Enders added.
Meanwhile, outside The Merge, David Lesperance, managing partner of immigration and tax advisor Lesperance & Associates, has turned his attention to Binance, the world’s largest cryptocurrency exchange by volume.
“Binance made waves in the cryptocurrency market this week by announcing a change in how it handles certain stablecoins on the exchange,” he said. “Binance, like Coinbase and FTX, is accumulating its holdings of some stablecoins in US dollars.”
Binance chose Circle’s USDC, Paxos’ USDP and True USD to pool, while Tether’s USDT, the largest stablecoin by market cap, was “clearly left out.”
“By bundling multiple stablecoins into a single dollar-denominated amount, cryptocurrency exchanges like Binance are hoping to gain greater liquidity to support their clients’ trading activity,” Lisberance said. “Where Binance differs is in how these tokens are accumulated, and the advantage that Binance gains, which accounts for nearly half of the daily volume of the five largest crypto exchanges.”
While Coinbase (Currency) Now combining USDC with the regular US dollar, he added, Binance, which is under investigation by the Department of Justice, said it will automatically transfer all users’ deposits and holdings from selected stablecoins directly to BUSD, the exchange’s own stablecoin.
“This measure is unprecedented and potentially anti-competitive,” said Lesperance. “However, since crypto and stablecoin exchanges are not yet fully regulated, they have not been challenged…. nonetheless!”
“This transfer is already an accepted industry practice and has been shown to be in the best interests of users above all,” a Binance spokesperson said.
The spokesperson said, referring to Paxos Trust Co. , a New York-based financial institution and technology company specializing in blockchain
“As the industry evolves, we will see more regulations around stablecoins and we believe this is beneficial for both exchanges and users,” the spokesperson added.