uh. Ethereum investors haven’t had a good couple of weeks, as DeFi King plunged below $1700, now trading 55% below its New Year’s Day open of $3722.
btc dominate
Further worry for fans of Vitalik’s creation will be the poor performance of bitcoin over the past month. While the market as a whole has fallen amid macro sentiment and a drop from Terra Circus, there have been at least relief rallies for bitcoin over the past few days. Ethereum, on the other hand, has been falling much more consistently.
The chart below shows it performing against bitcoin. ETH strongly outperformed BTC during 2020 and 2021 as bull markets raged and ETH took advantage of its high volatility and small market cap. However, as the market turns this year, we have seen BTC reassert its dominance over all things crypto, as has historically been in pullback periods.
additional problems
Digging into the fundamentals here, the factors driving ETH’s decline go beyond the bloodshed across the board. For as long as crypto enthusiasts can remember, this is a hypothetical merge that has been promised, postponed and re-promised. At this point, the merge triggers painful memories in my mind of being back home in Ireland.
I think we had a total of five lockdowns, ranging from three weeks to six months. Each one promised it was the last, but they just kept coming, thick and fast. 8 PM curfew, 2KM perimeter around the house, exercise quota and much more, it was a constant kick-the-down-the-road exercise as our government fell short of its own targets time and again and failed to plan accordingly .
While the ETH merge is still scheduled for August, last week was a reminder that it is far from set in stone, as it stumbled through the seven-block reorganization (or restructuring) of Beacon Chain last week. To be precise, seven blocks numbered 3,887,075 to 3,887,081 were knocked off the Beacon chain between 08:55:23 and 08:56:35 AM UTC.
To translate this into non-computer whiz speak, a reorg is the name given to an event when a block that was part of the main chain (the canonical chain) is closed due to a competing block defeating it. Usually, this can happen through a malicious attack or a bug.
The Ethereum Beacon chain experienced a 7-block deep restructuring about 2.5 hours ago. This suggests that the current validation strategy of nodes should be reconsidered to form a more stable chain than expected! (offers already exist) pic.twitter.com/BkQrKuUlw1
— Martin Koeppelmann (@koeppelmann) 25 May 2022
Ethereum developer Preston van Loon suggested that in this instance it was caused by a “non-trivial division” of the new and old client node software, dismissing any malice. Ethereum co-founder Vitalik Buterin declared His theory is a “good hypothesis”.
This, unfortunately, shows that by analysis @gakonst And @Vitalikbuterin Was very optimistic here when the article claimed that re-organization in POS over POW would improve stability.
We haven’t seen 7 block reorgs on the Ethereum mainnet in years. https://t.co/G5g8acG3L8 pic.twitter.com/AvZ6ygZRxs— Martin Koeppelmann (@koeppelmann) 25 May 2022
my thoughts
It is a hiccup but nothing to be worried about in the long term. However, it certainly hit home how rough the August timeline is. While many have given up on predicting the timing of this elusive overhaul, the sheer magnitude and scale of the project has certainly been underestimated by the cryptocurrency community.
The latest drop in Ethereum – it faltered significantly last week while Bitcoin was doing well – can be attributed to this additional doubt on the roadmap. With the price of a massive upgrade slated for August, and the market is uber-sensitive right now as investors simply try to survive, news like this always triggers a sell-off.
With broader market sentiment than at any point after the GFC, and the cryptocurrency facing all kinds of tough questions after the Terra implant, the space is only seeing the end of Ethereum’s bargain catching up and with a successful one. Need to pull merge.
I believe we are still ahead of it in August – with the Ropsten testnet merge providing some good news earlier today, one of the pivotal events before applying to the mainnet. But then, I believed the lockdown would last three weeks, and I spent so much time in my bedroom over the past two years that I forgot what the sky looked like.
Let’s hope I am not repeating my past mistakes here.
