Why Ethereum is diving today

Investors are selling the news about The Merge.

| More on:
A man stands on a ladder in a stripey one-piece swimsuit, ready to plunge into the freezing water through a hole in the ice.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened 

Have you ever heard "buy the rumor, sell the news"? That's what investors are taking to heart today in cryptocurrencies.

The news today was The Merge finalizing early this morning on the Ethereum (CRYPTO: ETH) blockchain. That's great for the blockchain's energy usage, but it hasn't helped its value, which has fallen over 10% in the last 24 hours.

So what 

The value of Ethereum fell below $1,000 in mid June, which was when rumors that The Merge was imminent started to spread. Speculation around The Merge pushed the value of Ethereum higher and now speculators may be jumping ship.

What many people may not know is that moving to proof of work isn't going to have much of an impact on Ethereum's performance as a blockchain. Transactions won't get cheaper or faster and there's no significant improvement in functionality. The biggest change is an over 99% reduction in energy consumption.

Now what 

It's not surprising to see Ethereum's value falling today. Investors who were betting on The Merge are likely exiting. What will be more important long-term are coming upgrades that will increase transactions per second and lower costs dramatically. That will help the blockchain scale, but it's also not clear when those upgrades will take place.

I wouldn't be surprised to see Ethereum continue to slide after this upgrade given there's nothing to speculate over. But watch the yield stakers are generating on the blockchain because that could be a value driver if transactions continue to be popular on Ethereum.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Travis Hoium has positions in Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum. The Motley Fool Australia has positions in and has recommended Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Happy woman on her phone while her electric vehicle charges.
International Stock News

Is Tesla the best EV stock for you?

Tesla stands out as the premier EV maker, but it might not be right for every investor.

Read more »

A woman sits on sofa pondering a question.
International Stock News

After Nvidia's 10-for-1 stock split, is it still a buy?

Nvidia shares saw a bump after their recent split.

Read more »

Investor looking at falling ASX share price on computer screen
International Stock News

Nvidia stock drops 6.5%, dragging artificial intelligence stocks lower

Is the AI bubble bursting?

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
International Stock News

Thinking about buying Nvidia stock? Here's why you might already own it

You might not have missed out on Nvidia's gains after all.

Read more »

Man smiling at a laptop because of a rising share price.
International Stock News

Nvidia investors just got some bullish news

The GPU leader has opportunities for robust growth beyond the artificial intelligence market.

Read more »

A beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices today
International Stock News

Is Nvidia stock going to $200 in the wake of its 10-for-1 stock split?

Wall Street analysts are boosting their price targets in the wake of Nvidia's high-profile stock split.

Read more »

A boy with a gold crown stands stoically looking straight ahead.
International Stock News

Can anyone topple Nvidia as the king of artificial intelligence investments?

There are many comparisons, but nearly all fall short.

Read more »

A woman stands triumphant with arms outstretched as she overlooks a city at sunset.
International Stock News

Nvidia shares reach world's most valuable milestone. Where to now?

Nvidia beats out Apple and Microsoft to be number one in the world.

Read more »