Somebody wake up Green Day, because September is ending. So what happened this month in cryptocurrencies? And how were we when we turned the page to October?
Table of Contents
Bitcoin and Ethereum lag
Nothing major, but Bitcoin and Ethereum both dropped over the month. Interestingly, Bitcoin has dropped more than Ethereum, which is unusual compared to the pattern we’ve seen historically, where Ethereum is generally the more volatile of the two. Merge was the big news, of course, as Ethereum completed the biggest blockchain upgrade in history on September 15th. The event went off without a hitch, although the price didn’t change much – suggesting it was priced ahead of time, as many suspected. In the short term, there isn’t much to say about whether Merge has affected anything regarding price, but it will be fascinating to follow the future now that the Ethereum ecosystem’s pipeline of work has been completely transformed. I have written before about my thoughts that staking yield could even act as a “risk-free” proxy for the De-Fi world, helping to provide a framework for valuations and laying the groundwork for ETH to mature further. The foundation must also allow Ethereum to separate from Bitcoin. I have long viewed Bitcoin as money and Ethereum as technology, and I think this move further accentuates the dichotomy – money needs proof of work, but the foundation of a DeFi system does not. But these are long-term considerations, and in the medium term, we are still very much correlated.
on-chain
Let’s jump on-chain to see any notable indicators that have surfaced for me over the course of the month. Firstly, given that Ethereum has completed The Merge, there is obviously no need for miners on the network anymore. This is the exact opposite of groundbreaking news, but it’s still cool to see the hash rate drop to zero in the chart below.
IntoTheBlock shows a clean graph below of net ETH issuance falling after the Merge. It didn’t fall into deflationary, which was a narrative that many had pushed in the run-up to the Merge. As I said in previous reviews, I believe this was more a case of naively following a type of logic that “deflation means the price goes up and I want the price to go up, so I will say ETH will be deflationary”. But again, the Merge went perfectly and it’s cool to see the emission rate drop so dramatically.
However, perhaps more somberly, Ethereum rates are down 80% quarter on quarter. This is for no other reason than a good old-fashioned drop in demand. The macro situation remains absolutely abominable and it follows that demand for the network is low (I’m probably being a little harsh as tier 2 is partially exacerbating this drop in rates, but it’s largely due to a general drop in demand) . Moving on to Bitcoin, the percentage of long-term holders – otherwise known as diamond handers – continues to climb back to its all-time high of nearly 64%, set last year. Data shows that this demographic – defined as those who have held Bitcoin for more than a year – remains steady, and this last month’s low is no different.
Mining
I was curious if there would be an increase in Bitcoin hash rate after the Ethereum Merge. Looking at the chart below, which shows the last three months, there doesn’t seem to be much movement. This makes sense, I suppose – there are other coins that miners can more easily use with their equipment, rather than Bitcoin.
At the top of that list is good old Ethereum Classic – a coin I had largely forgotten about until I realized its hash rate had increased to an all-time high on the Merge date, almost 4X overnight.
Conclusion
In fact, this month was about Merge and nothing else. We can talk about on-chain indicators all we want, and as a blockchain junkie, I’m more than happy to do so. But the reality is that in the short term, the only thing that matters for cryptocurrency is the macro situation. The lack of price activity around Merge proves this. The cryptocurrency has been and will continue to be traded as leveraged bets on the S&P 500 going forward. So buckle up and tune in to Jerome Powell’s words, because that’s all that really matters until we get some macro momentum again and things can start moving. Welcome back, Green Day.
