Ethereum is the second-biggest cryptocurrency by market cap right after Bitcoin. It recently had a significant shift in its consensus mechanism. Many crypto enthusiasts expected Ether prices to rise following this switch. However, Ethereum price continues to sink lower towards $1,000. Why is Ethereum price down after the POS transition? Is POS really insignificant?
Ethereum Recap
What is Ethereum (ETH)?
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps). It was created in 2015 by Vitalik Buterin, a Russian-Canadian programmer, and has since become one of the most popular blockchain platforms in the world.
Why is Ethereum Unique?
One of the key features of Ethereum is its use of smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts allow for the automation of complex processes and the creation of DApps, which can operate on the Ethereum network without any downtime, censorship, or interference from a third party.
New industries thanks to Ethereum?
Ethereum is home to a wide range of decentralized finance (DeFi) applications, which allow users to access a range of financial services, such as lending, borrowing, and trading, without the need for a traditional financial institution.
Why did Ethereum switch to PoS?
Ethereum, the second-largest cryptocurrency by market capitalization, made the switch from a proof-of-work (PoW) consensus algorithm to a proof-of-stake (PoS) consensus algorithm on September 15, 2022. This marked a significant shift for the Ethereum network, as it moved away from a system in which miners compete to validate transactions and create new blocks, in favor of a system in which validators stake their own Ether (ETH) to create new blocks and earn rewards.
The transition to PoS was seen as a major step forward for Ethereum, as it aims to address some of the key challenges faced by the PoW system, including high energy consumption, and scalability issues. By requiring validators to stake their own Ether, Ethereum 2.0 aims to incentivize good behavior and create a more secure and decentralized network.
Why is Ethereum Price Down after the POS transition?
Despite the benefits listed above, the price of Ethereum has remained relatively stagnant in the months following the switch to PoS. In fact, the price of ETH has actually declined from around $1,450 on September 15 to the current price of around $1,180 at the time of writing.
There are a number of factors that may have contributed to the recent decline in the price of Ethereum. One possible explanation is the overall state of the cryptocurrency market, which has seen a broad-based decline in recent months amid regulatory uncertainty and a general cooling of investor sentiment. Additionally, Ethereum has faced increased competition from other smart contract platforms, such as Binance Smart Chain and Polygon, which may have had an impact on its price.
It is also worth noting that the switch to PoS is just one aspect of the Ethereum 2.0 upgrade, and there are many other factors at play that may have impacted the price of ETH. For example, Ethereum 2.0 also introduces a number of scalability improvements, such as sharding, which may have had an impact on the demand for ETH.
Ethereum Prediction: Will Ethereum go up in 2023?
If we look at figure 1 below, we can notice that Ethereum is on a continuous downtrend. Prices failed to break this downtrend, as the entire crypto market is on a bearish trend. The recent FTX crash coupled with the negative outlook of the crypto market took a heavy toll on all cryptocurrencies. Things are looking bearish all until Q2-Q3 of next year in 2023.
Ethereum should continue to consolidate till next year at around $1,000 until the entire crypto market rebounds. This means more positive news, a better understanding of the legal crypto framework, and fewer crypto scammers in the market. For now, investors need to keep an eye on the 1K price mark.
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