Ethereum has broken below $1,700 since July 2021. At that time, ETH’s price was reacting to the downside due to an increase in selling pressure across the crypto market.
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This time, Ethereum seems to be reacting to poor macro-economic conditions, and a potential delay in its most important milestone in recent history: The Merge. The event that will complete ETH’s transition to a Proof-of-Stake (PoS) blockchain.
At the time of writing, Ethereum (ETH) trades at $1,680 with a 6% and 8% loss in the last 24-hours and 7-days, respectively. ETH is one of the worst performers in the top 10 by market cap followed by Solana (SOL), Dogecoin (DOGE), and XRP.
ETH with minor losses on the 4-hour chart. Source: ETHUSD Tradingview
The Ethereum network recently saw the successful deployment of “The Merge” on its oldest testnet, Ropsten. This was celebrated by the community with many claiming a mainnet launch could be possible by August or September this year.
“The Merge” implementation on Ropsten saw some difficulties, but ETH core developer Tim Beiko claimed they were addressed and “all fixed”.
The Difficulty Bomb is part of the mechanism that will enable Ethereum to migrate to a PoS consensus. This mechanism will progressively increase mining difficulty and prevent these actors to support a second ETH based on Proof-of-Work (PoW).
As Beiko explained, the Difficulty Bomb is already having an impact on the network:
The bomb is being felt on the network, and, in true bomb fashion, it appeared quicker than predicted Block times are ~14s and the Arrow Glacier EIP (authored by yours truly) predicted “a ~0.1 second delay to block time by June 2022 and a ~0.5 second delay by July 2022.
ETH core developers agreed on delaying this mechanism for at least 2 months. This will provide them with more time to work on the migration to a PoS consensus.
However, ETH core developers seem to disagree on what delaying the Difficulty Bomb implies for Ethereum. Ben Edgington, Lead Product Manager for Teku, an Eth2 client developed by ConsenSys, announced the following:
(…) we will push back the Ethereum difficulty bomb. We say it won’t delay the Merge. I sincerely hope not. Every extra week on PoW generates close to 1 Million tonnes of CO2 emissions.
Edgington believes developers should agree on a Merge mainnet target. In that way, clients and the ETH community can “prepare”.
In that sense, Beiko replied that the event is still expected to take place at some point from August to November this year. He believes only a “catastrophic event” could delay “The Merge” this year.
Beiko concluded the following on setting a specific date for “The Merge”:
I guess my view is that having an explicit target, at this point, basically wouldn’t change the speed of output from client teams, at least on the EL (Execution Layer). We have many implicit ones (devcon, bomb) as well as intrinsic motivation.
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Despite the progress on this important ETH event, the market is already soft, and any potential signs of weakness could contribute to an increase in selling pressure.