Merging comes and goes, markets lag and macro does its thing

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Someone wakes up Green Day, because September is coming to an end.

So, what happened in crypto this month? And what will we look like when we turn the page to October?

Bitcoin and Ethereum slowdown

Nothing out of the ordinary, but Bitcoin and Ethereum fell over the course of the month. Interestingly, Bitcoin pulled down more than Ethereum, which is unusual compared to the pattern we’ve seen in the past, where Ethereum is generally the more volatile of the two.

The Merge was, of course, the big news, as Ethereum completed the largest blockchain upgrade in history on September 15. The event came and went without a hitch, although the pricing didn’t do much – suggesting it was pre-priced, as many suspected.

In the short term, there isn’t much that has affected the merger in terms of price, but it will be fascinating to watch into the future as the pipeline undermining the Ethereum ecosystem has completely transformed.

I’ve previously written about my thoughts that the strike yield could even act as a “risk-free” proxy for the world of De-Fi, provide a framework for valuations and lay the groundwork for ETH to mature even more.

The groundwork should also allow Ethereum to decouple from Bitcoin. I’ve long seen 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 doesn’t.

But these are long term considerations and in the medium term we are still very correlated.

On the chain

Let’s jump on the chain to see standout indicators that caught my eye over the course of the month.

First, since Ethereum has completed the aforementioned Merge, there is clearly 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 below shows a neat chart of net issuance of ETH declining after the merger. It has not become deflationary, which was a story many had pushed in the run-up to the Merger.

As I mentioned in previous analysis, I believe this was more of a case of naively following a “deflationary means the price is going up and I want the price to go up, so I’ll say that ETH will be deflationary” kind logic. But again, Merge went perfectly and it’s cool to see the issue price drop so drastically.

However, perhaps even more bleak is the fact that Ethereum costs are falling by 80% quarter-on-quarter. This is for no other reason than an old-fashioned drop in demand. The macro situation remains absolutely dire and it follows that network demand is falling (I’m probably being a little harsh because Layer 2 is partially exacerbating this drop in rates, but this is largely due to an overall drop in demand).

Browsing for Bitcoin, the percentage of long-term holders – also known as diamond handers – continues to creep back to its all-time high of nearly 64%, around this time last year. The data shows that this demographic – defined as those who hold Bitcoin for more than a year – remains unmoved, and this latest bearish month is no different.


I was curious if there would be an increase in the hash rate on Bitcoin after the Ethereum merger.

Looking at the chart below, which shows the past three months, there doesn’t seem to be much movement. This makes sense I suppose – there are other coins that miners can browse more easily with their equipment instead of Bitcoin.

At the top of that list is the good old Ethereum Classic – a coin I had largely forgotten until I noticed the hash rate on the date of the merge had soared to an all-time high, nearly 4Xing overnight.


In reality, this month was about the Merger and nothing more. We can talk about on-chain indicators all we want, and as a blockchain junkie, I’m more than happy to do that.

But the reality is that in the short term, all that matters for crypto is the macro situation. The lack of pricing activity around the Merger proves this.

Crypto is and will be trading as leveraged bets on the S&P 500 in the future. So buckle up and tune in to the words of Jerome Powell because that’s all that really matters until we get some macro boost again and the things can start to move.

Welcome back, Green Day.

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