Ethereum has been trading below $1,700 since July 2021. At the time, the price of ETH was reacting lower due to increased selling pressure across the crypto market.
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This time around, Ethereum appears to be reacting to poor macroeconomic conditions and a potential delay in its biggest milestone in recent history: The Merge. The event that will complete the transition of ETH to a Proof-of-Stake (PoS) blockchain.
At time of writing, Ethereum (ETH) is trading at $1,680 with a 6% and 8% loss over 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.
The Ethereum network recently saw the successful deployment of “The Merge” on its oldest testnet, Ropsten. This was celebrated by the community with many stating that the mainnet launch might be possible in August or September of this year.
Implementation of “The Merge” on Ropsten experienced some difficulties, but ETH core developer Tim Beiko reclaimed they were addressed and “everything fixed”.
The difficulty bomb is part of the mechanism that will allow Ethereum to migrate to a PoS consensus. This mechanism will progressively increase the difficulty of mining and will prevent these actors from supporting a second ETH based on Proof of Work (PoW).
As Beiko explained, the Difficulty Bomb is already having an impact on the network:
The bombshell is being felt on the net and, in true bombshell fashion, it showed up quicker than anticipated. Block times are ~14s and the Arrow Glacier EIP (written by yours truly) predicted “a ~0.1 second delay to block time in June 2022 and a ~0.5 second delay to July 2022 .
ETH core developers agreed to delay this mechanism for at least 2 months. This will give them more time to work on migrating to a PoS consensus.
What a Delayed Difficulty Bomb Means for Ethereum
However, ETH core developers seem to disagree on what delaying the difficulty bomb for Ethereum entails. Ben Edgington, Senior Product Manager for Teku, an Eth2 client developed by ConsenSys, announced the following:
(…) we will push back the Ethereum difficulty bomb. We say that it will not delay the Fusion. I sincerely hope not. Each additional week in PoW generates close to 1 million tons of CO2 emissions.
Edgington believes that developers should agree on a mainnet Merge goal. That way, clients and the ETH community can “get ready.”
In that sense, Beiko responded that the event is still expected to take place sometime between August and November of this year. He believes that 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 point is that having an explicit target, at this point, would basically not change the output speed of the client machines, at least in the EL (execution layer). We have many implicits (devcon, bomb) as well as intrinsic motivation.
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Despite the progress in this major ETH event, the market is already weak and any potential signs of weakness could contribute to an increase in selling pressure.