Miners Dumps 16 000 ETH, ETC Fell by 43.1% a Week After the Ethereum Merge

2022-10-06, 03:44

[TL; DR]

🔹 Within a week after the Ethereum Merge, miners sold over 16 000 ETH.

🔹 Between September 12 and 19 the price of ETC decreased by over 43.1%.

🔹 Ravencoin and Ethereum classic (ETC) are some of the blockchains which use the proof-of-work consensus mechanism.

🔹 The increase in the Federal Funds rate affected the value of different securities in September 2022.

Introduction

The Merge impacted the Ethereum community and related blockchains such Ravencoin and Ethereum Classic (ETC). Changes in Ethereum dynamics have affected other blockchains such as Ethereum Classic. For example, the shift from the proof-of-work consensus mechanism to the proof-of-stake one means that some miners have to migrate to other blockchains where they continue with the mining process. This article explores how the Merge brought changes in the Ethereum community and some proof-of-work based blockchains.

Former Ethereum Miners dump over 16 000 ETH

A week after the successful launch of the Ethereum Merge, the former blockchain miners dumped over 16 000 ETH on the market between 12 and 19 September (OKLink). This massive ETH sell off reduced the cumulative amount of ETH the miners held to 245,000 worth around $319 million.

One of the reasons the miners sold off such an amount is that they no longer had any business with the Ethereum blockchain since it migrated to the proof-of-stake consensus mechanism.

According to some analysts, this sell off shows that the miners are reducing their reserve balances. The head of research at The Block, Lucas Outumuro believes that the miners’ huge disposal of ETH indicates that they are migrating to blockchains that currently operate on the proof-of-work (PoW) consensus mechanisms such as Ethereum Classic (ETC).

Lucas Outumuro said that the miners are “taking profits on their ETH holdings.” Some analysts also think that the miners have been sending their ETH to crypto exchanges in order to get airdrops from a potential rival blockchain, a fork of the Ethereum PoS blockchain. Others speculated that a large influx of institutional investors could push the price of ETH higher.

On the other hand, the director of blockchain market research at Quantum Economics, Alexandre Lores, thinks that some ETH holders who anticipated an increase in volatility after the Ethereum Merge opted to sell their holdings.

Lores said, “If miners had been accumulating Ethereum at a profit, or if they need to pay their electricity bill, they would have an incentive to sell at a profit, especially with the expected and actual increased volatility.”

Nevertheless, some analysts think that some miners may hold on to their ETH since they can stake it and earn high yield in return.

For example, the chief investment officer at digital asset management firm Arca, Jeff Dorman said, “Perhaps some [miners] will turn into speculators and hang on for a better price. Maybe some will turn into stakers and secure the new network.”

The fact that some miners chose to dump their ETH is one reason for the bearish ETH market that follows the Ethereum Merge. To this effect, Bankless newsletter editor, Lucas Campbell, said, “Miners dumping their ETH are an overhang that we will need to overcome over the next few months to resume the bullish mode of operation, but it will happen.”

Price of ETH dropped by 23.4% within a week after the Merge

Before the Ethereum Merge, the global crypto community anticipated that the Ethereum miners would move to other proof-of-work blockchains such as Ravencoin and Ethereum Classic (ETC). As such, some analysts believed that there would be a spike in the price of ETC.

Notably, the opposite is true. According to CoinGecko, a few days after the Ethereum Merge the price of ETC fell by 23.4%. In real terms, the price dropped from $38.93 to $29.39 within a week. On the other hand, the price of Ravencoin fell by more than 43.1%, from $0.06 to $0.03.

The market also noticed significant changes in the hash rate of ETH and Ravencoin since the launch of the Ethereum Merge. On the day of the launch, the ETH’s hash rate surged from 58.12 TH per second to 223.32 TH per second. However, it dropped to 160.32 TH per second within the following few days.

The hash power of Ravencoin also fluctuated in a similar manner. It increased from 9.64 TH to 19.57 per second before tumbling to 11.22 TH. Nevertheless, the following day the hash rate increased again to a peak of 23.50 TH per second.

ETH’s price movement within the same period

The price of ETH gradually increased a few weeks before the Merge. However, after the Merge it decreased from over $1 700 to around $1 300, an approximately 20% fall. There are several reasons for this unexpected decrease in ETH price.

This sharp decrease reflected the general market trend at that time. For example, during the week of the launch of the Ethereum Merge, the Federal Reserve said that it would increase interest rate following the continuation of high inflation rate. Generally, the Federal Reserve’s announcement of the high consumer price index resulted in gradual decrease in prices of many securities.

Source: Blsgov

For example, the Dow Jones Industrial Average decreased by 1,200 points, confirming that the CPI report affected most securities within the crypto market and traditional financial sector.

As we said above, the dumping of 16 000 ETH on the market contributed to the selling pressure in the market, resulting in lower ETH price.
The other reason why the Ethereum community was puzzled by the fall in the price of ETH after the Merge is that they anticipated a bullish momentum after the Merge. However, the developers had never promised that the Merge would increase the price of ETH. In fact, the effect of the Merge on the price of ETH will be in the long run not short term.

Conclusion

There were several unanticipated developments after the launch of the Ethereum Merge. For example, the price of ETC, Ravencoin and ETH fell by large margins within a week after the launch of the Merge. Also, Ravencoin and Ethereum Classic experienced many fluctuations in their hash rates.

Author: Mashell C., Gate.io Researcher
This article represents only the views of the researcher and does not constitute any investment suggestions.
Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.

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