Can Ethereum Recover From Losses Following Merge Upgrade?

Ethereum finally completed its long-awaited merge upgrade this week, but the coin saw further losses.

A recent rally in ETHUSD saw prices near $1,800 run out of steam and the coin has slumped to the previous lows around the $1,440 level.ethusd chart 0-Sep-19-2022-08-21-21-90-AM

ETHUSD 4 Hour Chart

Markets were higher in anticipation of the Ethereum technology upgrade, but it has been a “buy the rumour, sell the news” move.

In a September 5 blog, we said:

Investors should watch the daily action carefully in Ethereum as the coin is looking to get back above $1,600. “Larger resistance is ahead at the $1,750 level, and a failure at either of these, coupled with weakness in the broader market, could open up a short opportunity.”

That is what happened, and traders should have reassessed their expectations when the Ethereum development team said that there would be no change to gas fees on the blockchain.

The ether network has now moved to more energy-efficient technology, and although that is good for the long-term prospects, it means little in the short-term. Institutional investors were scared off by the summer crash in the Terra Project, while investors have also been spooked by an extended bear market.

Tim Beiko, a developer at the Ethereum Foundation, said, “I think the Merge can genuinely get those people who were interested in Ethereum but sceptical of the environmental impacts to come and experiment with it.”

In the week ahead, it will likely be the Federal Reserve that decides whether ETH has bottomed here. Markets expect a 0.75% rate hike from the Federal Reserve on Wednesday, but there have been suggestions of 1% among some analysts.

A higher than expected inflation print last week will likely encourage the Fed to continue with another hike in borrowing costs. US inflation was up 8.3% year-on-year, which was lower than July’s 8.5% figure, but still higher than analysts’ expectations.

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