Ethereum’s years-anticipated merger from proof-of-work to proof-of-stake finally happened on September 15, and it went off without a hitch. The Ethereum network now uses 99% less energy.
The merger was “what appears to be flawless,” said Joe Lubin, CEO of crypto software giant ConsenSys and co-founder of Ethereum. decipher in an exclusive video interview last week. “I’ve asked in a bunch of different contexts if I’m aware of anything being broken, and I haven’t heard anything.”
So why is ETH down a brutal 22% in the month since the merger?
Lubin’s answer is that the price action immediately after the merger was a “possibly unavoidable ‘sell the news’ type of activity,” along with some Ethereum miners “unloading their ether inventory while shutting down their rigs.” As for why ETH has continued to fall ever since, along with Bitcoin and the rest of the crypto market?
It’s macroeconomics, stupid.
“The economy is broken and is likely to remain broken for a while,” Lubin said. “So we’re still the tail wagging a very sick dog: the global macro situation. But our ecosystem and our company are doing pretty well, even with low volumes, low intensity. I think we’re all enjoying just building.”
It’s the favorite explanation of just about every founder in the crypto ecosystem right now, as crypto markets continue to be hit by the same economic headwinds in the US that weigh on stocks, bonds, and other more established investment vehicles.
Solana founder Anatoly Yakovenko points to the same factors and sees at least another bear market year.
“Looking at the macro stuff, I guess there will probably be another 12 to 18 months of this brutal Fed rate hike,” Yakovenko said in the latest episode of decipherThe gm podcast. “But there is an end to that. And just like the last bear market, a lot of teams built and focused on product-to-market fit, and really tried to build amazing products, a lot of them succeeded, I think, in a very dramatic way.”
FTX CEO Sam Bankman-Fried put it in similar terms, and perhaps most bluntly, speaking at Anthony Scaramucci’s SALT conference in New York last month: “Everything went down this year, because dollars They went up this year.”
Until money becomes less expensive, crypto markets are expected to remain stagnant. But Lubin and other builders remain as optimistic as ever about key parts of the cryptocurrency industry.
“I think NFTs still have a lot of legs, NFTs are going to see a lot of innovation,” he said. Decipher. “I imagine we are posting our moments of irrational exuberance regarding DeFi. I think it will continue to innovate and mature quite significantly, but I think the real edifice will be in the development of the Web3 economy.”