Data from CryptoCompare shows that the price of Bitcoin kept dropping throughout last week, moving from around $22,000 to a low under the $18,500 mark following a sell-off during the weekend that saw it lose more than seven per cent of its value in just a day.
Ethereum’s Ether – the second-largest cryptocurrency by market cap – traded in a way similar to BTC, dropping from around $1,700 to just under $1,300as its Merge upgrade appears to have turned into a ‘sell-the-news’ event.
Headlines in the cryptocurrency space last week were dominated by Ethereum’s Merge upgrade, which saw the cryptocurrency’s network transition from a proof-of-work consensus algorithm into a proof-of-stake consensus. The upgrade reduces Ethereum’s energy consumption by an estimated 99.95%, and precedes a series of other upgrades: the “Surge,” the “Verge,” the “Purge,” and the “Splurge”.
The Surge will increase scalability for rollups through sharding, while the Verge will achieve statelessness through Verkle trees. It will be followed by an elimination of historical data and technical debt, before the Splurge brings in a number of miscellaneous upgrades.
The Merge upgrade has essentially kicked miners out of the network. A number of large ETH mining pools have started supporting EthereumPoW (ETHW), a fork of the Ethereum network meant to support miners through its Proof-of-Work consensus. Mining pools including F2Pool, Poolin, and BTC.com are said to be supporting the fork.
The upgrade has also highlighted significant centralisation concerns, as more than 40% of the network’s blocks shortly after the transition were added by two entities: Coinbase and Lido. Seven players accounted for more than two-thirds of the stake on Ethereum’s network.
Lido is a decentralised protocol that users liquid staking services. Whenever users stake ETH through Lido, they receive stETH, a token representing their staked ETH they can use elsewhere in the cryptocurrency space. Coinbase is the world’s third-largest cryptocurrency exchange and allows its users to stake ETH through its platform.
If a single entity controls more than 66% of the network’s staked Ether, it could be able to make it more difficult for other to write transactions on the cryptocurrency’s ledger.
On top of these centralisation concerns, SEC Chairman Gary Gensler has said that Proof-of-Stake cryptocurrencies, which allow holders to passively earn return while securing the network through staking, could be securities. This would mean cryptocurrencies like Solana, Cardano, and Ethereum could be included.
Institutional investors undeterred
Over the week, a report from banking giant State Street said that institutional investors were unfazed by the cryptocurrency winter and have maintained their interest in blockchain technology and digital assets despite the market slump.
Irfan Ahmad, the Asia Pacific digital lead for the bank’s crypto unit State Street Digital, added that despite the extreme volatility seen in the market over the summer, the firm’s institutional clients keep making moves in the sector.
While institutional clients have been undeterred by falling digital asset prices, Nasdaq-listed business intelligence firm MicroStrategy, known as the largest corporate buyer of Bitcoin, has filed with the US Securities and Exchange Commission (SEC) to sell as much as $500 million in stock to fund additional BTC purchases.
On top of that, financial services giant Fidelity is contemplating whether to let individual brokerage customers trade Bitcoin. The move follows a BlackRock partnership with Coinbase to offer crypto trading to institutional customers.
BlackRock’s partnership with Coinbase was met with another response from Wall Street giants including Charles Schwab, Citadel Securities, and Fidelity Digital Assets: the launch of cryptocurrency exchange EDX Markets.
Binance’s stablecoin move could bolster Tether’s importance
Analysts at JPMorgan Chase have said that Binance’s recent decision to convert existing balance and new deposits of USDC, USDP, and TUSD into its own stablecoin, BUSD, will benefit Tether.
Binance’s move will also see it end trading pairs for the three stablecoins being converted to BUSD. JPMorgan’s analysts believe the move will increase Tether’s importance in cryptocurrency trading.
Another cryptocurrency exchange making headlines this week was Coinbase, which is adding information on politicians’ crypto friendliness directly onto its app as it amps up its policy advocacy efforts. Coinbase’s American customers can now check the crypto sentiment scores of members of Congress based on their past statements.
Coinbase CEO, Brian Armstrong, announced the new feature on social media, noting that the effort will, over time, expand to global elections, candidates running for office, and to help candidates solicit donations in crypto.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
Featured image via Unsplash.