Because Ethereum fell 40% this week

Why Ethereum fell 40% this week - Crypto investor 740x492 1Cryptocurrency prices have dropped dramatically this week - nearly all of the top 100 cryptocurrencies are in the red, and many have experienced significant losses over the past seven days. Bitcoin (BTC) fell more than 30% in a week and Ethereum (ETH) fell 40%. At one point, Ethereum nearly hit the $ 1.000 mark, a significant drop from its November high of over $ 4.700. Read on to find out why the recent cryptocurrency crash has hurt Ethereum more than many of its counterparts.

What drove Ethereum's decline?

There are several reasons why Ethereum's price has dropped so much this week. Some are related to broader economic and market conditions, while others are specific to Ethereum. Let's try to analyze some of them.

1. The entire cryptocurrency market is in decline

The cryptocurrency fear and greed index, which measures market sentiment, is currently at 7 - the lowest in years. This reflects the widespread fear that cryptocurrency prices may drop further. As central banks around the world introduce severe economic tightening measures to try to keep inflation in check, riskier assets like cryptocurrencies suffer. Furthermore, fears of a recession and the skyrocketing cost of living make people more reluctant to buy cryptocurrencies.

These extreme pricing conditions affect the decentralized finance (DeFi) industry, which - as we have seen - can quickly explode. DeFi is a core component of the broader cryptocurrency market, and many DeFi applications are built on Ethereum. Question marks looming over the future of several key players almost certainly fuel Ethereum's downtrend. Furthermore, these sudden price drops could prompt authorities to speed up regulatory changes, which could drive prices down further.

2. Delays in the merger of Ethereum

Ethereum was the first cryptocurrency to introduce smart contracts, and many applications are built on its network. However, network congestion and high gas tariffs have prompted numerous developers and investors to seek alternatives, including when trading with platforms such as Bitcoin Pro. As long as Ethereum fails to complete a gradual upgrade to address these issues, it will continue to lose market share.

The merger of Ethereum is a milestone. The merger will not solve high gas tariffs or heavy congestion, but it is a vital step on the road to the final upgrade, which it will. Merge is a shift from a proof-of-work mining system to a proof-of-stake model, which is significantly more environmentally friendly. The enthusiasm for the merger is great, but the delays have also caused concern.

Recently, Ethereum developers said they would delay the so-called "trouble bomb," an integrated code that aims to incentivize miners to switch to the new proof-of-work system. The delay of the trouble bomb has sparked fears that the merger may be delayed beyond the currently hoped-for August deadline.

3. Problems with the Ethereum in installments

There is currently a lot of distrust towards decentralized financial platforms. This is following the collapse of the Earth (LUNA) and Celsius' decision to suspend withdrawals. Without going into too much detail, there is a staked form of Ethereum called stETH on a DeFi platform called Lido. What has scared investors is that stETH has lost its peg, meaning a stETH is no longer worth an ETH. According to a report by Huobi, there is a risk that the drop in the price of stETH could trigger a chain of liquidations, with "serious" consequences.


Markets dislike uncertainty and the cryptocurrency market is full of it right now. For Ethereum, its impending merger piles up uncertainty upon uncertainty, and this is one of the reasons it has been overly affected by the recent turmoil.

If the merger is successful, it will give Ethereum and the entire market the necessary boost. But this is a major update and there may be technical difficulties, regardless of the accuracy of the tests. Unfortunately, any additional hitch or delay puts Ethereum's price under pressure. The fear is that Ethereum will not be able to maintain its dominant position in the world of smart contracts if it fails to solve some of its problems.

Some investors may be tempted to buy the downside and buy ETH at a relative discount. However, the price could fall further, especially if the merger were to be delayed again. Make sure you understand the risks and only invest as much money as you can afford to lose - this way, if Ethereum fails to maintain its leading position, it won't derail your finances.